Dividend Policy Analysis Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc. operations.
(a) Suggest factors to be considered by the board of directors in establishing a dividend policy.
(b) Compute the rate of return on assets, profit margin on sales, earnings per share, price-earnings ratio, and current ratio for each of the 5 years for Matheny Inc.
(c) Comment on the appropriateness of declaring a cash dividend at this time, using the ratios computed in part (b) as a major factor in your analysis.
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2011
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2010
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2009
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2008
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2007
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Sales
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$20,000
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$16.000
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$14,000
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$6,000
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$4,000
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Net Income
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2.400
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1,400
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800
|
700
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250
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Average total assets
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22,000
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19,000
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11,500
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4,200
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3,000
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|
Current assets
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8,000
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6,000
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3.000
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1,200
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1,000
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Working capital
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3,600
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3,200
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1,200
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500
|
400
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Common shares:
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|
|
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Number of shares outstanding (000)
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2,000
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2,000
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2,000
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20
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20
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Average market price
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$9
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$8
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$4
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-
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-
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