Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company’s financial statements for the two most recent years.
Profitability Ratios Refer to the information for Kepler Company on the previous page. Also, assume that for last year and for the current year, the market price per share of common stock is $2.98. In addition, for last year, assets and equity were the same at the beginning and end of the year. Required:
1. Compute the following for each year: (a) return on assets, (b) return on stockholders’ equity, (c) earnings per share, (d) price-earnings ratio, (e) dividend yield, and (f) dividend payout.
2. Conceptual Connection: Based on the analysis in Requirement 1, would you invest in the common stock of Kepler?