Refer to the consolidated financial statements and accompanying notes for Corus Entertainment Inc. reproduced in Appendix A.
Instructions
(a) Did Corus report any of the following in fiscal 2014: (1) stock dividends or stock splits, (2) other comprehensive income, or (3) corrections of prior period errors?
(b) Did Corus repurchase any shares in fiscal 2014 or 2013? If so, how much cash did it spend to reacquire the shares?
(c) Basic EPS of $1.77 for 2014 was reported in the chapter in Illustration 14-11. How much was basic EPS for 2013? Did EPS improve or weaken in 2014?
(d) Did Corus report any fully diluted EPS in fiscal 2014 and 2013? If yes, what was the difference between these amounts and the basic EPS in each year?
(e) Corus’s price-earnings ratio for 2014 was reported in the chapter in Illustration 14-12. The price-earnings ratio for 2013 was 13.2 times (based on a market value per share of $25.25 on August 30, 2013). Did the price-earnings ratio improve or weaken in 2014? Is your answer consistent with your findings in part (c)? Explain.
(f) Corus’s payout ratio for 2014 was reported in the chapter in Illustration 14-13. Calculate its payout ratio for 2013. Explain what caused the difference between the two years.
SOLUTION
(a) For the 2014 fiscal year of Corus:
(1) There were no stock dividends or stock splits.
(2) Other comprehensive income in 2014 was an overall loss of $74,000
(3) There were no corrections of prior period errors.
(b) For the 2014 fiscal year, Corus did not repurchase any shares. They did repurchase shares in 2013. The Consolidated Statements of Changes in Shareholders’ Equity reports a reduction in Share Capital of $708,000 and a reduction in Retained Earnings of $756,000 attributed to the repurchase of shares. The two amounts make up the total paid in cash to repurchase the shares of $1,464,000.
(c) The basic earnings per share ratio for 2013 was $1.91. The earnings per share weakened in 2014.
(d) Fully diluted earnings per share were reported in both years. In 2014, the fully diluted amount was one cent lower than the basic amount, at $1.76 per share. For the 2013 fiscal year, the fully diluted figure was also one cent lower than the basic earnings per share ratio, at $1.90.
(e) The price-earnings ratio increased from 13.2 times in 2013 to 13.8 times in 2014. The price-earnings ratio increased from 2013 to 2014 indicating that investors believe the current income levels will continue or increase. This is inconsistent with the answer from part (c) because the basic earnings per share decreased from 2013 to 2014. However, the decrease does not appear to be affecting the market price per share nor the price-earnings ratio.
(f) Corus’ payout ratio for 2013 was 0.53 ($84,452 ÷ $159,895). The causes for the increased payout ratio from 2013 to 2014 is the increase in dividends and decline in profit.