All I need for this part of the paper is part E

timer Asked: Jun 15th, 2014

Question description


BYP11-7 In recent years the fast-food chain Wendy’s International has purchased many

treasury shares. From January 3, 1999, to December 30,
2001, the number of shares outstanding

has fallen from 124 million to 105 million. The following
information was drawn

from the company’s financial statements (in millions).

Year ended

Dec. 30, 2001 Jan. 3, 1999

Net income $ 193.6 $ 123.4

Total assets 2,076.0 1,837.9

Average total assets 2,016.9 1,889.8

Total common stockholders’ equity 1,029.8 1,068.1

Average common stockholders’ equity 1,078.0 1,126.2

Total liabilities 1,046.3 769.9

Average total liabilities 939.0 763.7

Interest expense 30.2 19.8

Income taxes 113.7 84.3

Cash provided by operations 305.2 233.8

Cash dividends paid on common stock 26.8 31.0

Preferred stock dividends 0 0

Average number of common shares outstanding 109.7 119.9


Use the information provided to answer the following

(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


(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.

(c) Compute
the debt to total assets ratio and interest coverage ratio. Discuss the change

in the company’s solvency.

(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


(e) Do
the purchase of treasury stock and the shift toward more reliance on debt

to have been wise strategic moves?

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