Reference no: EM131558119

Discussion Questions

1. If we divide users of ratios into short-term lenders, long-term lenders, and stockholders, in which ratios would each group be most interested, and for what reasons?

2. Explain how the Du Pont system of analysis breaks down return on assets. Also explain how it breaks down return on stockholders' equity.

3. If the accounts receivable turnover ratio is decreasing, what will be happening to the average collection period?

4. What advantage does the fixed charge coverage ratio offer over simply using times interest earned?

5. Is there any validity in rule-of-thumb ratios for all corporations, for example, a current ratio of 2 to 1 or debt to assets of 50 percent?

6. Why is trend analysis helpful in analyzing ratios?

7. Inflation can have significant effects on income statements and balance sheets, and therefore on the calculation of ratios. Discuss the possible impact of inflation on the following ratios, and explain the direction of the impact based on your assumptions.

a. Return on investment.
b. Inventory turnover.
c. Fixed asset turnover.
d. Debt-to-assets ratio.

8. What effect will disinflation following a highly inflationary period have on the reported income of the firm?

9. What effect will disinflation following a highly inflationary period have on the reported income of the firm?

10. Comparisons of income can be very difficult for two companies even though they sell the same products in equal volume. Why?

Problems

1. Dental Delights has two divisions. Division A has a profit of $200,000 on sales of $4,000,000. Division B is only able to make $30,000 on sales of $480,000. Based on the profit margins (returns on sales), which division is superior?

2. Griffey Junior Wear, Inc., has $800,000 in assets and $200,000 of debt. It reports net income of $100,000.

a. What is the return on assets?
b. What is the return on stockholders equity?

3. Bass Chemical, Inc., is considering expanding into a new product line. Assets to support this expansion will cost $1,200,000. Bass estimates that it can generate $2 million in annual sales, with a 5 percent profit margin. What would net income and return on assets (investment) be for the year?

4. Franklin Mint and Candy Shop can open a new store that will do an annual sales volume of $750,000. It will turn over its assets 2.5 times per year. The profit margin on sales will be 6 percent. What would net income and return on assets (investment) be for the year?

5. Hugh Snore Bedding, Inc., has assets of $400,000 and turns over its assets 1.5 times per year. Return on assets is 12 percent. What is its profit margin (return on sales)?

6. One-Size-Fits-All Casket Co. foslloinwcso:me statement for 2008 is as

Sales .......................................................................................$3,000,000
Cost of goods sold.................................................................. 2,100,000
Gross profit ............................................................................ 900,000
Selling and administrative expense........................................ 450,000
Operating profit...................................................................... 450,000
Interest expense...................................................................... 75,000
Income before taxes ............................................................... 375,000
Taxes (30%) ........................................................................... 112,500
Income after taxes .................................................................. $262,500

a. Compute the profit margin for 2008.
b. Assume in 2009, sales increase by 10 percent and cost of goods sold increases by 25%. The firm is able to keep all other expenses the same. Once again, assume a tax rate of 30 percent on income before taxes. What are income after taxes and the profit margin for 2009?

7. Easter Egg and Poultry Company has $2,000,000 in assets and $1,400,000 of debt. It reports net income of $200,000.

a. What is the firm's return on assets?
b. What is its return on stockholders equity?
c. If the firm has an asset turnover ratio of 2.5 times, what is the profit margin (return on sales)?

8. Sharpe Razor Company has total assets of $2,500,000 and current assets of $1,000,000. It turns over its fixed assets 5 times a year and has $700,000 of debt. Its return on sales is 3 percent. What is Sharpe's return on stockholders? equity?

9. Baker Oats had an asset turnover of 1.6 times per year.

a. If the return on total assets (investment) was 11.2 percent, what was Baker's profit margin?
b. The following year, on the same level of assets, Baker's assets turnover 1.4 times and its profit margin was 8 percent. How did the return on total assets change from that of the previous year?

10. Global Healthcare Products has the following ratios compared to its industry for 2008.

	Global Healthcare	Industry
Return on sales	2%	10%
Return on assets	18%	12%

Explain why the return-on-assets ratio is so much more favorable than the return-on-sales ratio compared to the industry. No numbers are necessary; a one-sentence answer is all that is required.

11. Acme Transportation Company has the following ratios compared to its industry for 2009.

	Acme Transportation	Industry
Return on sales	9%	6%
Return on assets	12%	24%

Explain why the return-on-equity ratio is so much less favorable than the return-on-assets ratio compared to the industry. No numbers are necessary; a one-sentence answer is all that is required.

12. Gates Appliances has a return-on-assets (investment) ratio of 8 percent.
a. If the debt-to-total-assets ratio is 40 percent, what is the return on equity?
b. If the firm had no debt, what would the return-on-equity ratio be?

13. Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation.
a. Butters Corporation has a profit margin of 7 percent and its return on assets (investment) is 25.2 percent. What is its assets turnover?
b. If the Butters Corporation has a debt-to-total-assets ratio of 50 percent, what would the firm's return on equity be?
c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 35 percent?

14. Jerry Rice and Grain Stores has $4,000,000 in yearly sales. The firm earns 3.5 percent on each dollar of sales and turns over its assets 2.5 times per year. It has $100,000 in current liabilities and $300,000 in long-term liabilities.

a. What is its return on stockholders equity?
b. If the asset base remains the same as computed in part a, but total asset turnover goes up to 3, what will be the new return on stockholders equity? Assum margin stays the same as do current and long-term liabilities.

15. Assume the following data for Interactive Technology and Silicon Software.

	Interactive Technology (IT)	Silicon Software (SS)
Net income	$15,000	$50,000
Sales	150,000	1,000,000
Total assets	160,000	400,000
Total debt	60,000	240,000
Stockholders equity	100,000	160,000

a. Compute return on stockholders a ineqtuhietytefxotr. both firms using ratio Which firm has the higher return?
b. Compute the following additional ratios for both firms. Net income/Sales
Net income/Total assets Sales/Total assets Debt/Total assets
c. Discuss the factors from part b that added or detracted from one firm having a higher return on stockholders equity than the other firm as

16. A firm has sales of $3 million, and 10 percent of the sales are for cash. The year-end accounts receivable balance is $285,000. What is the average collection period? (Use a 360-day year.)

17. Martin Electronics has an accounts receivable turnover equal to 15 times. If accounts receivable are equal to $80,000, what is the value for average daily credit sales?

18. Perez Corporation has the following financial data for the years 2007 and 2008:

	2007	2008
Sales	$8,000,000	$10,000,000
Cost of goods sold	6,000,000	9,000,000
Inventory	800,000	1,000,000

a. Compute inventory turnover based on ratio number 6, Sales/Inventory, for each year.
b. Compute inventory turnover based on an alternative calculation that is used by many financial analysts, Cost of goods sold/Inventory, for each year.
c. What conclusions can you draw from part a and part b?

19. The Speed-O Company makes scooters for kids. Sales in 2008 were $8,000,000. Assets were as follows:

Cash	$200,000
Accounts receivable	1,600,000
Inventory	800,000
Net plant and equipment	1,000,000
Total assets	$3,600,000

a. Compute the following:
1. Accounts receivable turnover
2. Inventory turnover
3. Fixed asset turnover
4. Total asset turnover

b. In 2009, sales increased to $10,000,000 and the assets for that year were as follows:

Cash	$200,000
Accounts receivable	1,800,000
Inventory	2200,000
Net plant and equipment	1,050,000
Total assets	$5,250,000

Once again, compute the four ratios listed in 19a.

20. The balance sheet for Stud Clothiers is shown below. Sales for the year were $2,400,000, with 90 percent of sales sold on credit.

STUD CLOTHIERS
Balance Sheet 200X
Assets		Liabilities and Equity
Cash	$     60,000	Accounts payable	$   220,000
Accounts receivable...	240,000	Accrued taxes	30,000
Inventory	350,000	Bonds payable (long-term)
			150,000
Plant and equipment...	410,000	Common stock	80,000
		Paid-in capital	200,000
		Retained earnings..	380,000
Total assets	$1,060,000	Total liabilities and equity...	$1,060,000

Compute the following ratios:
a. Current ratio.
b. Quick ratio.
c. Debt-to-total-assets ratio.
d. Asset turnover.
e. Average collection period.

21. Neeley Office Supplies income statement is given below.

a. What is the times interest earned ratio?
b. What would be the fixed charge coverage ratio?

NEELEY OFFICE SUPPLIES

Sales .............................................................................. $200,000
Cost of goods sold......................................................... 115,000
Gross profit ................................................................... 85,000
Fixed charges (other than interest)................................ 25,000
Income before interest and taxes................................... 60,000
Interest........................................................................... 15,000
Income before taxes ...................................................... 45,000
Taxes ............................................................................. 15,300
Income after taxes ......................................................... $ 29,700

22. Using the income statement for Times Mirror and Glass Co., compute the following ratios:

a. The interest coverage.
b. The fixed charge coverage.
The total assets for this company equal $80,000. Set up the equation for the Du Pont system of ratio analysis, and compute c, d, and e.
c. Profit margin.
d. Total asset turnover.
e. Return on assets (investment).

TIMES MIRROR AND GLASS COMPANY

Sales .............................................................................. $126,000
Less: Cost of goods sold ......................................... 93,000
Gross profit ................................................................... $ 33,000
Less: Selling and administrative expense ............... 11,000
Less: Lease expense................................................ 4,000
Operating profit*........................................................... $ 18,000
Less: Interest expense ............................................. 3,000
Earnings before taxes .................................................... $ 15,000
Less: Taxes (30%)................................................... 4,500
Earnings after taxes.......................................................
*Equals income before interest and taxes. $ 10,500

23. A firm has net income before interest and taxes of $120,000 and interest expense of $24,000.

a. What is the times interest earned ratio?
b. If the firm's lease payments are $

24. In January 1999, the Status Quo Company was formed. Total assets were $500,000, of which $300,000 consisted of depreciable fixed assets. Status Quo uses straight-line depreciation, and in 1999 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $26,000 per year each of the last 10 years. Other assets have not changed since 1999.

a. Compute return on assets at year-end for 1999, 2001, 2004, 2006, and 2008. (Use $26,000 in the numerator for each year.)
b. To what do you attribute the phenomenon shown in part a?
c. Now assume income increased by 10 percent each year. What effect would this have on your above answers? Merely comment.

25. Calloway Products has the following data. Industry information is also shown.

Year	Net Income	Total Assets	Industry Data on Net Income/Total Assets
2006	$360,000	$3,000,000	11%
2007	380,000	3,400,000	8
2008	380,000	3,800,000	5
			Industry Data on
Year	Debt	Total Assets	Debt/Total Assets
2006	$1,600,000	$3,000,000	52%
2007	1,750,000	3,400,000	40
2008	1,900,000	3,800,000	31

As an industry analyst comparing the firm to the industry, are you likely to praise or criticize the firm in terms of:

a. Net income/Total assets?
b. Debt/Total assets?

26. Jodie Foster Care Homes, Inc., shows the following data:

Year	Net Income	Total Assets	Stockholders	Equity Debt
2005	$118,000	$1,900,000	$   700,000	$1,200,000
2006	131,000	1,950,000	950,000	1,000,000
2007	148,000	2,010,000	1,100,000	910,000
2008	175,700	2,050,000	1,420,000	630,000

a. Compute the ratio of net income to total assets for each year and comment on the trend.

b. Compute the ratio of net income to stockholders equity and co Explain why there may be a difference in the trends between parts a and b.

27. The United World Corporation has three subsidiaries.

	Computers	Magazines	Cable TV
Sales .......................................	$16,000,000	$4,000,000	$8,000,000
Net income (after taxes).........	1,000,000	160,000	600,000
Assets .....................................	5,000,000	2,000,000	5,000,000

a. Which division has the lowest return on sales?
b. Which division has the highest return on assets?
c. Compute the return on assets for the entire corporation.
d. If the $5,000,000 investment in the cable TV division is sold off and redeployed in the computer division at the same rate of return on assets currently achieved in the computer division, what will be the new return on assets for the entire corporation?

28. Omni Technology Holding Company has the following three affiliates:

Software	Personal Computers	Foreign Operations
Sales .................................    $40,000,000	$60,000,000	$100,000,000
Net income (after taxes)...        2,000,000	2,000,000	8,000,000
Assets ...............................        5,000,000	25,000,000	60,000,000
Stockholders equity                 4,000,000	10,000,000	50,000,000

a. Which affiliate has the highest return on sales?
b. Which affiliate has the lowest return on assets?
c. Which affiliate has the highest total asset turnover?
d. Which affiliate has the highest return on stockholders equity?
e. Which affiliate has the highest debt ratio? (Assets minus stockholders equity equals debt.)
f. Returning to question b, explain why the software affiliate has the highest return on total assets.
g. Returning to question d, explain why the personal computer affiliate has a higher return on stockholders' equity than the foreign operations affiliate even though it has a lower return on total assets.

29. Bard Corporation shows the following income statement. The firm uses FIFO inventory accounting.

BARD CORPORATION
Income Statement for 2008

Sales .....................................................................	$200,000 (10,000 units at $20)
Cost of goods sold................................................	100,000 (10,000 units at $10)
Gross profit ..........................................................	100,000
Selling and administrative expense......................	10,000
Depreciation .........................................................	20,000
Operating profit....................................................	70,000
Taxes (30%) .........................................................	21,000
Aftertax income ...................................................	$  49,000

a. Assume in 2009 the same 10,000-unit volume is maintained, but that the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $10 per unit. Also assume that selling and administrative expense will be 5 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute aftertax income for 2009.

b. In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? Explain why this impact occurred.

c. Now assume that in 2010 the volume remains constant at 10,000 units, but the sales price decreases by 15 percent from its year 2009 level. Also, because of FIFO inventory policy, cost of goods sold reflects the inflationary conditions of the prior year and is $11 per unit. Further, assume selling and administrative expense will be 5 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute the aftertax income.

30. Construct the current assets section of the balance sheet from the following data. (Use cash as a plug figure after computing the other values.)

Yearly sales (credit) ..................................................................... $720,000
Inventory turnover ....................................................................... 6 times
Current liabilities ......................................................................... $105,000
Current ratio ................................................................................. 2
Average collection period ............................................................ 35 days
Current assets: Cash......................................................................... $
Accounts receivable ................................................
Inventory .................................................................
Total current assets ..............................................

31. The Griggs Corporation has credit sales of $1,200,000. Given the following ratios, fill in the balance sheet below.

Total assets turnover ................................... 2.4 times
Cash to total assets...................................... 2.0%
Accounts receivable turnover ..................... 8.0 times

Inventory turnover ...................................... 10.0 times
Current ratio ................................................ 2.0 times
Debt to total assets ...................................... 61.0%

GRIGGS CORPORATION
Balance Sheet 2008
Assets Liabilities and Stockholders Equity

Cash ..............................
Accounts receivable ...... Inventory .......................
Total current assets Fixed assets ..................
Total assets ...................

Current debt .............................................
Long-term debt.........................................
Total debt ...........................................
Equity.......................................................

Total debt and stockholders equity

32. We are given the following information for the Coleman Machine Tools Corporation.

Sales (credit) ....................................................................... $7,200,000
Cash..................................................................................... 300,000
Inventory ............................................................................. 2,150,000
Current liabilities ................................................................ 1,400,000
Asset turnover ..................................................................... 1.20 times
Current ratio ........................................................................ 2.50 times
Debt-to-assets ratio ............................................................. 40%
Receivables turnover........................................................... 8 times

Current assets are composed of cash, marketable securities, accounts receivable, and inventory. Calculate the following balance sheet items.
a. Accounts receivable.
b. Marketable securities.
c. Fixed assets.
d. Long-term debt

33. The following data are from Sharon Stone and Gravel, Inc., financial statements. The firm manufactures home decorative material. Sales (all credit) were $60 million for 2008.

Sales to total assets......................................... 3.0 times
Total debt to total assets................................. 40%

Current ratio ................................................... 2.0 times
Inventory turnover ......................................... 10.0 times
Average collection period .............................. 18.0 days
Fixed asset turnover ....................................... 7.5 times

Fill in the balance sheet:

Cash..................................... Current debt ..........................................

Accounts receivable ............ Inventory .............................
Total current assets ....... Fixed assets .........................
Total assets....................

Long-term debt......................................
Total debt ........................................
Equity....................................................

Total debt and stockholders equity

34. Using the financial statements for the Goodyear Calendar Company, calculate the 13 basic ratios found in the chapter.

GOODYEAR CALENDAR COMPANY
Balance Sheet December 31, 2008
Assets
Current assets:
Cash.............................................................................................. $ 40,000
Marketable securities ................................................................... 30,000
Accounts receivable (net) ............................................................ 120,000
Inventory ...................................................................................... 180,000
Total current assets ................................................................... $370,000
Investments ...................................................................................... 40,000
Plant and equipment......................................................................... 450,000
Less: Accumulated depreciation .................................................. (100,000)
Net plant and equipment ........................................................... 350,000
Total assets ....................................................................................... $760,000
GOODYEAR CALENDAR COMPANY
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable ......................................................................... $ 90,000
Notes payable............................................................................... 10,000
Accrued taxes............................................................................... 10,000
Total current liabilities .............................................................. 110,000
Long-term liabilities:
Bonds payable.............................................................................. 170,000
Total liabilities .......................................................................... 280,000
Stockholders ....equity...........................................................
Preferred stock, $100 par value ................................................... 90,000
Common stock, $1 par value ....................................................... 60,000
Capital paid in excess of par ........................................................ 230,000
Retained earnings......................................................................... 100,000
Total stockholders? equity....................................................... 480,000
Total liabilities and stockholders ....equity........................... $760,000

GOODYEAR CALENDAR COMPANY
Income Statement
For the Year Ending December 31, 2008
Sales (on credit)................................................................................ $2,000,000
Less: Cost of goods sold .............................................................. 1,300,000
Gross profit ...................................................................................... 700,000
Less: Selling and administrative expenses................................... 400,000*
Operating profit (EBIT) ................................................................... 300,000
Less: Interest expense .................................................................. 20,000
Earnings before taxes (EBT)............................................................ 280,000
Less: Taxes................................................................................... 112,000
Earnings after taxes (EAT)............................................................... $ 168,000
*Includes $10,000 in lease payments.

35. Given the following financial statements for Jones Corporation and Smith Corporation:
a. To which company would you, as credit manager for a supplier, approve the extension of (short-term) trade credit? Why? Compute all ratios before answering.
b. In which one would you buy stock? Why?

JONES CORPORATION
Current Assets		Liabilities
Cash ...............................	$ 20,000	Accounts payable ...................	$100,000
Accounts receivable .......	80,000	Bonds payable (long-term).....	80,000
Inventory........................	50,000
Long-Term Assets		Stockholders                ? Equity
Fixed assets ....................	$500,000	Common stock .......................	$150,000
Less: Accumulated depreciation.............	(150,000)	Paid-in capital ........................ Retained earnings ...................	70,000   100,000
*Net fixed assets ........	350,000
Total assets..............	$500,000	Total liabilities and equity	$500,000

Sales (on credit)...................................................................... $1,250,000
Cost of goods sold.................................................................. 750,000
Gross profit ............................................................................ 500,000
†Selling and administrative expense ................................... 257,000
Less: Depreciation expense................................................. 50,000
Operating profit...................................................................... 193,000
Interest expense...................................................................... 8,000
Earnings before taxes ............................................................. 185,000
Tax expense............................................................................ 92,500
Net income ............................................................................. $ 92,500
*Use net fixed assets in computing fixed asset turnover.
†Includes $7,000 in lease payments.

SMITH CORPORATION
Current Assets		Liabilities
Cash.................................	$ 35,000	Accounts payable ..................	$ 75,000
Marketable securities ......	7,500	Bonds payable (long-term)....	210,000
Accounts receivable ........	70,000
Inventory .........................	75,000
Long-Term Assets		Stockholders                Equity
Fixed assets .....................	$500,000	Common stock.......................	$ 75,000
Less: Accumulated depreciation ................	(250,000)	Paid-in capital........................ Retained earnings ..................	30,000     47,500
*Net fixed assets ...........	250,000
Total assets.................	$437,500	Total liabilities and equity...	$437,500

Sales (on credit) .......................................................... $1,000,000
Cost of goods sold ...................................................... 600,000
Gross profit ................................................................. 400,000
†Selling and administrative expense ...................... 224,000
Less: Depreciation expense .................................... 50,000
Operating profit .......................................................... 126,000
Interest expense .......................................................... 21,000
Earnings before taxes.................................................. 105,000
Tax expense ................................................................ 52,500
Net income.................................................................. $ 52,500
*Use net fixed assets in computing fixed asset turnover.
†Includes $7,000 in lease payments.

COMPREHENSIVE PROBLEM
Comprehensive Problem 1.

Al Thomas has recently been approached by his brother-in-law, Robert Watson, with a proposal to buy a 20 percent interest in Watson Leisure Time Sporting Goods. The company manufactures golf clubs, baseball bats, basketball goals, and other similar items.

Mr. Watson is quick to point out the increase in sales over the last three years as indicated in the income statement, Exhibit 1. The annual growth rate is 20 percent. A balance sheet for a similar time period is shown in Exhibit 2, and selected industry ratios are presented in Exhibit 3. Note the industry growth rate in sales is only approximately 10 percent per year.

There was a steady real growth of 2 to 3 percent in gross domestic product during the period under study. The rate of inflation was in the 3 to 4 percent range.

The stock in the corporation has become available due to the ill health of a current stockholder, who needs cash. The issue here is not to determine the exact price for the stock, but rather whether Watson Leisure Time Sporting Goods represents an attractive investment situation. Although Mr. Thomas has a primary interest in the profitability ratios, he will take a close look at all the ratios. He has no fast and firm rules about required return on investment, but rather wishes to analyze the overall condition of the firm. The firm does not currently pay a cash dividend, and return to the investor must come from selling the stock in the future. After doing a thorough analysis (including ratios for each year and comparisons to the industry), what comments and recommendations do you offer to Mr. Thomas?

Comprehensive Problem 2

Sun Microsystems is a leading supplier of computer related products, including servers, workstations, storage devices, and network switches.

In the letter to stockholders as part of the 2001 annual report, President and CEO Scott G. McNealy offered the following remarks:

Fiscal 2001 was clearly a mixed bag for Sun, the industry, and the economy as a whole. Still, we finished with revenue growth of 16 percent and that's significant. We believe it's a good indication that Sun continued to pull away from the pack and gain market share. 

For that, we owe a debt of gratitude to our employees worldwide, who aggressively brought costs down even as they continued to bring exciting new products to market.

The statement would not appear to be telling you enough. For example, McNealy says the year was a mixed bag with revenue growth of 16 percent. But what about earnings? You can delve further by examining the income statement in Exhibit 1. Also, for additional analysis of other factors, consolidated balance sheet(s) are presented in Exhibit 2.

1. Referring to Exhibit 1, compute the annual percentage change in net income per common
share-diluted (2nd numerical line from the bottom) for 1998 1999, 1999?2000,
2000 2001.
2. Also in Exhibit 1, compute net income/net revenue (sales) for each of the four years. Begin with 1998.
3. What is the major reason for the change in the answer for question 2 between 2000 and 2001? To answer this question for each of the two years, take the ratio of the major income statement accounts (which follow Exhibit 1 on the next page) to net revenues (sales).

Cost of sales
Research and development
Selling, general and administrative expense Provision for income tax

4. Compute return on stockholders equity for 2000 a and 2.

5. Analyze your results to question 4 more completely by computing ratios 1, 2a, 2b, and 3b (all from this chapter) for 2000 and 2001. Actually the answer to ratio 1 can be found as part of the answer to question 2, but it is helpful to look at it again.

What do you think was the main contributing factor to the change in return on stockholders equity between 2000 and 2001? Think in terms of the Du Pont system of analysis.

6. The average stock prices for each of the four years shown in Exhibit 1 were as follows: 1998 11¼
1999 16¾
2000 28½
2001 9½

a. Compute the price/earnings (P/E) ratio for each year. That is, take the stock price shown above and divide by net income per common stock-dilution from Exhibit 1.

b. Why do you think the P/E has changed from its 2000 level to its 2001 level? A brief review of P/E ratios can be found under the topic of Price-Earnings Ratio Applied to Earnings per Share in Chapter 2.

7. The book values per share for the same four years discussed in the preceding question were:

1998 $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?