Exercise 15-20 Presented below is information from the annual report of Emporia Plastics, Inc. Operating income $532,150 Bond interest expense 135,000 397,150 Income taxes 183,432 Net income $213,718 Bonds payable $1,000,000 Common stock 875,000 Retained earnings 375,000 (a) Compute the return on common stockholders’ equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.) (Round answers to 1 decimal place, e.g. 16.8%.) Rate of return on common stock equity % Rate of interest paid on bonds payable % (b) Is Emporia Plastics, Inc. trading on the equity successfully? Yes or No
Exercise 15-20 Presented below is information from the annual report of Emporia Plastics, Inc. Operating income $532,150 Bond interest expense 135,000 397,150 Income taxes 183,432 Net income $213,718 Bonds payable $1,000,000 Common stock 875,000 Retained earnings 375,000 (a) Compute the return on common stockholders’ equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.) (Round answers to 1 decimal place, e.g. 16.8%.) Rate of return on common stock equity % Rate of interest paid on bonds payable % (b) Is Emporia Plastics, Inc. trading on the equity successfully? Yes or No
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 15-20
Presented below is information from the annual report of Emporia Plastics, Inc.
(a) Compute the return on commonstockholders’ equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.) (Round answers to 1 decimal place, e.g. 16.8%.)
(b) Is Emporia Plastics, Inc. trading on the equity successfully?
| Operating income | $532,150 | |
| Bond interest expense | 135,000 | |
| 397,150 | ||
| Income taxes | 183,432 | |
| Net income | $213,718 | |
| Bonds payable | $1,000,000 | |
| Common stock | 875,000 | |
| 375,000 |
(a) Compute the return on common
|
|
% | ||
| Rate of interest paid on bonds payable |
|
% |
(b) Is Emporia Plastics, Inc. trading on the equity successfully?
Yes or No
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