Principles of Managerial Finance

CHAPTER 2 Financial Statements and Analysis 81

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a. Prepare a statement of retained earnings for the year ended December 31,

2003, for Hayes Enterprises. (Note:Be sure to calculate and include the

amount of cash dividends paid in 2003.)

b. Calculate the firm’s 2003 earnings per share (EPS).

c. How large a per-share cash dividend did the firm pay on common stock dur-

ing 2003?

2–9 Changes in stockholders’ equity Listed are the equity sections of balance sheets

for years 2002 and 2003 as reported by Mountain Air Ski Resorts, Inc. The

overall value of stockholders’ equity has risen from $2,000,000 to $7,500,000.

Use the statements to discover how and why this happened.

The company paid total dividends of $200,000 during fiscal 2003.

a. What was Mountain Air’s net income for fiscal 2003?

b. How many new shares did the corporation issue and sell during the

year?

c. At what average price per share did the new stock sold during 2003 sell?

d. At what price per share did Mountain Air’s original 500,000 shares sell?

2–10 Ratio comparisons Robert Arias recently inherited a stock portfolio from his

uncle. Wishing to learn more about the companies that he is now invested in,

Robert performs a ratio analysis on each one and decides to compare them to

each other. Some of his ratios are listed below.

Assuming that his uncle was a wise investor who assembled the portfolio with

care, Robert finds the wide differences in these ratios confusing. Help him out.

Island Burger Fink Roland

Ratio Electric Utility Heaven Software Motors

Current ratio 1.10 1.3 6.8 4.5

Quick ratio 0.90 0.82 5.2 3.7

Debt ratio 0.68 0.46 0 0.35

Net profit margin 6.2% 14.3% 28.5% 8.4%

Mountain Air Ski Resorts, Inc.

Balance Sheets (partial)

Stockholders’ Equity 2002 2003

Common stock ($1.00 par)

Authorized—5,000,000 shares

Outstanding— 1,500,000 shares 2003 $1,500,000

— 500,000 shares 2002 $ 500,000

Paid-in capital in excess of par 500,000 4,500,000

Retained earnings  (^1) , (^0)  (^0)  (^0) , (^0)  (^0)  (^0)   (^1) , (^5)  (^0)  (^0) , (^0)  (^0)  (^0) 
Total stockholders’ equity $

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