Problem 3 (20 points) Select a Fortune 500 company whose name starts with the fi
ID: 2782180 • Letter: P
Question
Problem 3 (20 points) Select a Fortune 500 company whose name starts with the first letter in your last name and obtain the company's most recent 10-K report. Be sure that the company has a complex capital structure. Attach the equity section of the balance sheet and the notes relevant to answering the following questions Does the company have preferred stock and common stock (or different classes of common stock)? Do its stocks have a par or stated value; if so, what are they? How many of each type of stock are authorized and have been issued? What is the average issue price? a) b) Were any shares issued in any of the years reported in the financial statements? At what price? c) What dividends were paid in each of the years reported in the financial statements? What is the payout ratio? Does the company have a stock-based compensation plan? How many options are outstanding? When do they expire? Were any options exercised during any of the years reported in the financial statements? At what exercise price? d) e) What number of shares was used to compute the diluted earnings per share in each of the years reported? What elements caused the dilution? Were there any convertible securities or other potentially dilutive items that were not included in the computation of diluted earnings per share? If so, explain why they were excluded. Does the company follow the required GAAP disclosure for earnings per share?Explanation / Answer
The latest 10k report for Raytheon is for the year 2016.
a. The company only has common stock and no preferred stock or other classes of shares. Stated par value of a common stock is $0.01 per share. 1,450 million shares have been authorized and 293 million shares are outstanding as on December 31, 2016.
Average issue price = (3+398)/293 = $1.37
b. No fresh shares were issued in 2015 as well as in 2016. In fact in both these years Raytheon repurchased common stock under its share repurchase program.
c. A dividend of $850 million was paid in 2016 and $797 million in 2015. Dividend payout ratio = dividend/net income.
d. Yes, the company does have a stock-based compensation plan. Number of shares available for new awards under stock-based compensation plan at the end of 2016 was 6.7 million shares. Weighted average exercise price is not provided as RSU’s do not have an exercise price.
e. In 2016 296.8 million shares and in 2015 305.2 million shares were used to compute diluted earnings per share. The elements that caused dilution are stock plan activities and share repurchases. Outstanding RSAs, RSUs, and LTPP is included in computation of diluted shares. No there were no convertible securities.
As per U.S. GAAP companies are required to present EPS for an extraordinary item on the face of the income statement or in the notes to the financial statements.
In this case Raytheon is reporting EPS from continuing operations and from discontinued operations. Thus Raytheon is following GAAP disclosure for EPS.
2016 2015 Dividend 850.00 797.00 Net income 2,174.00 2,067.00 Dividend payout ratio 39.10% 38.56%Related Questions
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