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GibsonSM_09 - Chapter 9 For the Investor TO THE NET 1...

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Chapter 9 For the Investor TO THE NET 1. Georgia–Pacific a. 2004 2003 2002 Earnings per common share Basic per share income (loss) from continuing operations $2.45 $1.29 $(0.84) (Loss) income from discontinued operations, net of taxes (0.01 ) (0.3 9 ) 0.04 Income (loss) before accounting change 2.44 0.90 (0.80) Cumulative effect of accounting changes, net of taxes 0.11 (2.29 ) Net income (loss) $2.44 $1.01 $(3.09 ) Diluted per share: Income (loss) from continuing operations $2.38 $1.29 $(0.84) (Loss) income from discontinued operations, net of taxes (0.01 ) (0.39 ) 0.04 Income (loss) before accounting changes 2.37 0.90 (0.80) Cumulative effect of accounting changes, net of taxes 0.11 (2.29 ) Net income (loss) $2.37 $1.01 $(3.09 ) b. Price/Earnings Ratio January 1, 2005 January 3, 2004 December 28, 2002 $37.48 $30.56 $15.80 $2.38 $1.29 $(0.84) 15.75 23.69 N/A c. Percentage of Earnings Retained 2004 2003 2002 $626,000,000 − $324,000,000 − ($200,000,000) − (129,000,000) (126,000,000) ($118,000,000) $626,000,000 $324,000,000 ($200,000,000) 79.4% 61.1% Negative 245
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d. Dividend Payout 2004 2003 2002 $0.50 $0.50 $0.50 $2.38 $1.29 $(0.84) 21.0% 38.8% Negative e. Dividend Yield 2004 2003 2002 $0.50 $0.50 $0.50 $37.48 $30.56 $15.80 1.33% 1.64% 3.16% 2. Motorola (In Millions) December 31, 2004 2003 2002 Reorganization of business (15) 23 605 Other charges (income) 111 (57) 754 Gains on sales of investments and businesses, net 460 539 81 Other (141) (142) (1,354) All of the above were in continuing operations Earnings (loss) from continuing operations 2,191 928 (1,350) Loss from discontinued operations, net of tax (659) (35) (1,135) Net earnings (loss) 1,532 893 (2,485) 3. Boeing a. Earnings per Common Share December 31, 2004 2003 2002 $2.30 $0.89 $0.61 b. Price/Earnings Ratio $51.77 $42.14 $32.99 $2.24 $0.85 $2.84 23.11 49.58 11.62 c. Percentage of Earnings Retained 246
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$1,820 − 648 $685 − 572 $2,296 − 571 $1,820 $685 $2,296 64.4% 16.5% 75.1% d. Dividend Payout e. Dividend Yield $0.85 $0.68 $0.68 $51.77 $42.14 $32.99 1.64% 1.61% 2.06% 4. Duratek, Inc. a. Total Assets (In Thousands) December 31, 2004 2003 $268,537,000 $283,144,000 b. Shareholders’ Equity $68,326,000 $37,866,000 c. Common Stock Shares Issued and Outstanding Issued 16,236,781 15,229,100 Treasury stock (1,770,306 ) (1,738,720 ) Issued and outstanding 14,466,475 13,490,380 d. Total Capitalization December 31, 2004 2003 Issued and outstanding shares (a) 14,466,485 13,490,380 Market price (b) $24.91 $13.04 Total capitalization (a) × (b) $360,359,892 $175,914,555 e. Total capitalization results from multiplying issued and outstanding shares by the market price. Shareholders’ equity is a book value number. 247 $0.85 $0.68 $0.68 $2.24 $0.85 $2.84 37.9% 80.0% 23.9%
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QUESTIONS 9-1. Earnings per share is the amount of income earned on a share of common stock during an accounting period. 9-2. The Financial Accounting Standards Board suspended the reporting of earnings per share for nonpublic companies. 9-3. Keller & Fink is a partnership. Earnings per share is a concept that only applies to corporate income statements. 9-4. Earnings per share is a concept that only applies to common stock. The earnings per common share computation only uses earnings available to common stockholders. To arrive at the income that applies to common stock, preferred dividends are subtracted from net income in the numerator of the ratio. 9-5. Since earnings pertain to an entire year, they should be related to the common shares outstanding during the year. The year-end common shares outstanding may not be representative of the shares outstanding during the year.
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