Financial Management Web Project

Part 2 Financial Analysis and Planning

5. Analyze your results in Question 4 more complete ly 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 Question 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 t erms of the Du Pont

of analysis.

6. The e stock prices for each of the ears sh own 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 yea r.

b. Is there any dramatic shift in the ratios worthy of not e?

W E B E X E R C I S E

1. IBM was mentioned in the chapter as having an un even performance. Lets check

this out. Go to its website, www.ibm.com, and follow the steps below. Under

"Information for" at the bottom of the page, select "Investor s:' Select "Financial

Snapshot" on the next page.

2. Click on "Stock Chart "How has IBM's stock been d oing recently?

3. Click on "Financial Snapshot." Assuming IBM's h istorical 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?

,.

..

S.

Noi a w yoc

er to look

turn Pont

tis

S[OCIC

~n

level? •pings

ng

s check der uncial

ratio

tand?

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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