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Problem
Over the years, Donna Dow has been a very successful investor. She investigates a company thoroughly before purchasing its shares. Donna is interested in the common stock of IBU Computers Limited. The following data are available for the company:
2013
2012
2011
Current ratio*
1.9
2.0
2.1
Acid-test ratio
1.1
1.0
.9
Accounts receivable turnover
3.6X
3.5X
3.0X
Inventory turnover
4X
5X
6X
Current liabilities
$1M
Sales
$10M
Gross Profit Ratio
30%
Dividends paid per share**
$4
$3
$2.50
Dividend yield ratio
5.5%
Dividend payout ratio
40%
Return on total assets
10%
12%
8%
Return on common stockholders equity
14.5%
9%
* Current assets consist of cash, accounts receivable, and inventory.
**There were no changes in common stock outstanding over the three-year period.
Donna would like answers to a number of specific questions regarding this data. Respond in a complete but concise manner to each of her questions.
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