You work for an organization that provides loans to businesses. You are working

Question

You work for an organization that provides loans to businesses. You are working with a client who is requesting a loan that will require a review of financial and related performance documents. You have been asked to review the documents and summarize your findings in a loan recommendation for your management team.

- Cash dividends of $1,000,000 ($2.00 per share) were paid in both 2017 and in 2016.

- All sales are made on credit.

EPS (Earnings per share)

Can you please provide some insight on what this Data means and whether it is significant?

EPS (Earnings per share) 3,247,000/500,000 = $6.49 2,520,000/500,000 = $5.04 PE ratio (Price/Earnings) 104/$6.49 = 16.02 $81/$5.04 = 16.07 Dividend yield % 2/$104 = 1.9% $2/$81 = 2.5%

Explanation / Answer

Answer :-

Here with the given information of the 2 years that it is not significant to provide loan to this business or give the business only by taking proper securities The reason for it are as follows that the earnings of the company are reduced and also the PE ratio of the company is reduced. Both the things shows the negativity towards company . Here with the perspective of the dividend we see company pay the dividend this is good but it also shows the fact that the company has not any further better opportunity to invest the company thats why the company pay the dividend. The dividend yield of the company is increased only due to the reduction in price therefore the increase of dividend is also not good.

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