Comparative Financial Statements for Springville Company for the Last Two

question 11

Essay

Comparative financial statements for Springville Company for the last two years appear below.The market price of Springville's common shares was $25 per share on December 31,Year 2.During Year 2,dividends of $2,000,000 were paid to preferred shareholders and $10,000,000 to common shareholders.

$\begin{array}{|l|r|}\hline&\text {Springville Company}\\&\text {Income Statemen}\\&\text {For the Year Ended December 31, Year}\\&2\\&\text {(dollars in thousands)}\\\hline\text { Sales (All on Account) } & \$ 280000 \\\hline \text { Costs of Goods Sold } & \$ 200000 \\\hline \text { Gross Margin } & \$ 80000 \\\hline \text { Operating Expenses } & \$ 6133 \\\hline \text { Net Operating Income } & \$ 18667 \\\hline \text { Interest Expense } & \$ 5000 \\\hline \text { Net Income before Taxes } & \$ 13667 \\\hline \text { Income Taxes (40\%) } & \$ 5467 \\\hline \text { Net Income } & \$ 8200\\\hline\end{array}$

Required:
Calculate the following for Year 2:
a)Dividend payout ratio.
b)Dividend yield ratio.
c)Price-earnings ratio.
d)Accounts receivable turnover.
e)Inventory turnover.
f)Return on total assets.
g)Return on common shareholders' equity.
h)Was financial leverage positive or negative for the year? Explain.