Presented here are summarized data from the balance sheets and income statements of Wiper, Inc.:
WIPER, INC.
Condensed Balance Sheets
December 31, 2009, 2008, 2007 ( in millions)
2009 2008 2007
- Current assets . . . . . . . . . . . . . . . . . .. . $ 677 $ 891 $ 736
- Other assets . . . . . . . . . . . . . . . . . . . . . 2,413 1,920 1,719
- $ 3,090 $ 2,811 $ 2,455
- Current liabilities . . . . . . . . . . . . . . . . . . $ 562 $ 803 $ 710
- Long- term liabilities . . . . . . . . . . . . . . . 1,521 982 827
- Owners' equity . . . . . . . . . . . . . . . . . . 1,007 1,026 918
- $ 3,090 $ 2,811 $ 2,455
WIPER, INC.
Selected Income Statement and Other Data For the Years Ended
December 31, 2009 and 2008 ( in millions)
2009 2008
- Income statement data: Sales . . .................... .$ 3,050 $ 2,913
- Operating income . . . . . . . . . ........................ . . . 296 310
- Interest expense . . . . . . . . ........................ . . . . 84 65
- Net income . . . . . . . . ................... . . . . . . .. . . 192 187
- Other data:
- Average number of common shares outstanding . .. . 41.3 46.7
- Total dividends paid . . . . . . . . . . . . . . . . . . . . . ... . $ 50.0 $ 52.3
Required:
a. Calculate return on investment, based on net income and average total assets, for 2009 and 2008. Show both margin and turnover in your calculation.
b. Calculate return on equity for 2009 and 2008.
c. Calculate working capital and the current ratio for each of the past three years.
d. Calculate earnings per share for 2009 and 2008.
e. If Wiper's stock had a price/ earnings ratio of 13 at the end of 2009, what was the market price of the stock?
f. Calculate the cash dividend per share for 2009 and the dividend yield based on the market price calculated in part e.
g. Calculate the dividend payout ratio for 2009.
h. Assume that accounts receivable at December 31, 2009, totaled $ 309 million. Calculate the number of days' sales in receivables at that date.
i. Calculate Wiper's debt ratio and debt/ equity ratio at December 31, 2009 and 2008.
j. Calculate the times interest earned factor for 2009 and 2008.
k. Review the results of these calculations, evaluate the profitability and liquidity of this company, and state your opinion about its suitability as an investment for a young, single professional with funds to invest in common stock.