During a recent period, the fast-food chain Wendy's International purchased many treasury shares. This caused the number of shares outstanding to fall from 124 million to 105 million. The following information was drawn from the company's financial statements (in millions).
Information for
the
Year after
Purchase
Information for the
Year before
Purchase
of Treasury Stock
of Treasury Stock
Net income
$193.6
$ 123.4
Total assets
2,076.0
1,837.9
Average total assets
2,016.9
1,889.8
Total common stockholders' equity
1,029.8
1,068.1
Average common stockholders' equity
1,078.0
1,126.2
Total liabilities
1,046.3
769.0
Average total liabilities
939.0
763.7
Interest expense
30.2
19.8
Income taxes
113.7
84.3
Cash provided by operations
305.2
233.6
Cash dividends paid on common stock
26.8
31.0
Preferred stock dividends
0
0
Average number of common shares outstanding
109.7
119.9
Use the Information provided to answer the following questions.
Discuss the change in the company's profitability over this period.
Earnings per share
Return on common stockholders' equity
Return on assets
Year ended
After Purchase of
Before Purchase of
Treasury Stock
Treasury Stock
$1.76
$1.03
18%
11%
9.6%
6.5%
