BREWSTER COMPANY

B U S 11 4 M a n a g e r i a l A c c o u n t i n g

Presented by:
Len Sasot
Winnie Denosta
R o b i n Ve n t u r i n a
Case Problem

Brewster has 95,000 shares of common stock outstanding which

gives earnings per share of $ 11.72 ($ 1,113,000 / 95,000).
Dividends are $ 5 per share and the market price of stock is $ 120.
  Compute the ratios shown
above for Brewster
Company.

 Prepare comments to the

president indicating areas of
apparent strength and
weaknesses for Brewster
Company in relation to the
Requirements industry.
Average Industry vs Brewster Ratio

4
 Brewster Company needs to find ways and means to maximize use of its
assets to further improve its earnings as evidenced by 10% return on their
assets compared to industry average of 17.6%. This is also shown in the
10.2% price-earnings ratio as compared to the industry average of 12.3%,
Comments to the and times interest earned of only 4.8 versus the industry’s rate of 6.
The company, as a result, obtains only 10.9% cash to cover its debts as
President against industry average of 25%.
The company can payout the shareholders well as seen on the 4.2%
dividends yield and 42.7% payout ratio compared to industry averages of
3.9% and 38%, respectively.
Other ratios directly related to operations, such as its current ratio of 4.4
and quick ratio of 2.6 which are higher than the industry averages, will help
in achieving profitability although will still need further improvement.
THANK YOU!