Question during a recent period the fast-food chain wendys, Ask an Expert

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Question: 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).

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.

(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?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92661120

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