Information extracted from the financial statements of Sleep Country Canada Holdings Inc. for the years ending December 31, 2018, 2019, and 2020 is given in Exhibit 11.12.

Required

a. Calculate Sleep Country’s price/earnings ratio for 2018 through 2020. Comment on whether the ratio’s trend over this period reflects the market having a positive outlook regarding the company’s future. 

b. Calculate Sleep Country’s dividend payout ratio and dividend yield for 2018, 2019 and 2020. What do the results of these ratios tell us about Sleep Country?

c. Calculate Sleep Country’s return on equity ratio for 2019 and 2020. Note that Sleep Country’s articles of incorporation authorize only common shares. Comment on how effectively Sleep Country’s management has been able to use the equity of its shareholders to generate returns.

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Market price per share Earnings per share Dividends per share Net income (in thousands) Shareholders' equity (in thousands) 2020 $26.91 $ 1.73 $ 0.39 $ 63,307 $358,542 2019 $ 19.87 $ 1.50 $ 0.77 $ 55,460 $305,510 2018 $ 19.83 $ 1.61 $ 0.72 $ 59,641 $303,744