During a recent period, the fast-food chain Wendy”s International purchased many treasury shares….During a recent period, the fast-food chain Wendy”s International purchased many treasury shares….

During a recent period, the fast-food chain Wendy"s International purchased many treasury shares. This caused the number of shares outstanding to fall from 124 million to 105 million. The following information was drawn from the company"s financial statements (in millions).

Host Marriott

Marriott International

Sales

$1,501

$8,415

Net income

(25)

200

Total assets

3,822

3,207

Total liabilities

3,112

2,440

Common stockholders" equity

710

767

Information for the

Information for the

Year after Purchase

Year before Purchase

of Treasury Stock

of Treasury Stock

Net income

$ 193.6

$ 123.4

Total assets

2,076.0

1,837.9

Average total assets

2,016.9

1,889.8

Total common stockholders" equity

1,029.8

1,068.1

Average common stockholders" equity

1,078.0

1,126.2

Total liabilities

1,046.3

769.9

Average total liabilities

939.0

763.7

Interest expense

30.2

19.8

Income taxes

113.7

84.3

Cash provided by operations

305.2

233.8

Cash dividends paid on common stock

26.8

31.0

Preferred stock dividends

0

0

Average number of common shares outstanding

109.7

119.9

Instructions

Use the information provided to answer the following questions.

(a) Compute earnings per share, return on common stockholders" equity, and return on assets for both years. Discuss the change in the company"s profitability over this period.

(b) Compute the dividend payout ratio. Also compute the average cash dividend paid per share of common stock (dividends paid divided by the average number of common shares outstanding). Discuss any change in these ratios during this period and the implications for the company"s dividend policy.

(c) Compute the debt to total assets ratio and interest coverage ratio. Discuss the change in the company"s solvency.

(d) Based on your findings in (a) and (c), discuss to what extent any change in the return on common stockholders" equity was the result of increased reliance on debt.

(e) Does it appear that the purchase of treasury stock and the shift toward more reliance on debt were wise strategic moves?

NEED HELP WITH SUCH A TASK? WE HAVE THE BEST TUTORS FOR YOU. ORDER NOW FROM 10$/PG