micheal smith only
Part 2 Financial Analysis and Planning
5. Analyze your results in Question 4 more co mpletely by comput ios 1,
2a, 2b, and 3b (all from this chapter) for 2000 and 2001. Ac e answer to
Ratio 1 can be found as part of the answer to Ques tion 2 is helpful to look
at it initially.
What do you think was the main contributin to the change in return
tockholders' equity between 2000 and 200 nk in terms of the Du Pont
of analysis.
6. The e stock prices for each of the ears shown in Exhibit 4 were as
1998 ',
1999
2000 28~
2001 9'/z
a. Compute the
price shown
from Exhibit
b. Why do y~lk the P/E has c d
A brief ~,✓ of P/E ratios can be d to Earnings per Share i
per share for the same four7. The
(P/E) ratio for each year. That is, take the stock
Eby net income per common stock-dilution
from its 20001eve1 to its 2001 level?
under the topic of Price-Earnings
ter 2.
sed in the preceding
q were:
998 $1.18
1999 $1.55
2000 $2.29
2001 $3.26
a. Compute the ratio of price to book value for each year.
b. Is there any dramatic shift in the ratios worthy of note?
W E B E X E R C I S E
1. IBM was mentioned in the chapter as having a n uneven performance. Lets check
this out. Go to its website, www.ibm.com, and fol low the steps below. Under
"Information for" at the bottom of the page, select "Investors:' Select "Financial
Snapshot" on the next page.
2. Click on "Stock Chart "How has IBM's stock been doing recently?
3. Click on "Financial Snapshot." Assuming I BM's historical price-earnings ratio
is 18, how does it currently stand?
r 4. Assuming its annual dividend yield is 2.5 percent, how does it currently stand?
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s check der uncial
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Chapter 3 Financial Analysis
5, Assuming IBM's historical "LT" (long-term) debt/equity is 100 percent, how
does it currently stand? Generally speaking, is that good or bad?
(. Assuming its historical return on assets is 10 percent, how does it currently
stand? Generally speaking, is that good or bad?
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