Earnings Per Share and Treasury Buyback
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1) Explain how earnings per share might be affected by treasury stock transactions.
2) Calculate the ratio of debt to total assets for 2003 and 2004, and discuss the implications of the change.
2004 2003 dollars in millions
Net Sales 9614 8812
Net Earnings 891 787
Total Assets 10790 10143
Total Liabilities 8533 8699
Common stock, $0.25 par value 104 104
Capital in excess of par value 25
Retained earnings 2701 2248
Treasury stock, at cost 108 204
Number of shares outstanding (in millions) 413 410
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Solution Summary
The relationship between earnings per share and treasury stock transactions is explained. Ratio of debt to total assets are also calculated.
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Simply stated, earnings per share are determined by the number of outstanding shares. Since treasury stock is stock held by the company, then if the ...
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