(a)
Compute the earnings per share for year ended after and before purchase of
Compute the return on common
Compute the return on assets ratio for year ended after and before purchase of treasury stock.
Discuss the change in the company’s profitability over this period.
(b)
Compute the payout ratio for year ended after and before purchase of treasury stock.
Compute the average cash dividend paid per share for year ended after and before purchase of treasury stock.
Discuss the change in these ratios during this period and the implications for the company’s dividend policy.
(c)
Compute the debt to assets ratio for year ended after and before purchase of treasury stock.
Compute the times interest earned ratio for year ended after and before purchase of treasury stock.
Discuss the change in company’s solvency.
(d)
Discuss to what extent the increased reliance on debts changes in the return on common stockholders’ equity.
(e)
Explain whether the purchase of treasury stock and the reliance on debt financing was a wise strategic move.
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Chapter 11 Solutions
ACCOUNTING(LL)
- The following were selected from among the transactions completed by Babcock Company during November of the current year: Nov. 3 Purchased merchandise on account from Moonlight Co., list price $85,000, trade discount 25%, terms FOB destination, 2/10, n/30. 4 Sold merchandise for cash, $37,680. The cost of the goods sold was $22,600. 5 Purchased merchandise on account from Papoose Creek Co., $47,500, terms FOB shipping point, 2/10, n/30, with prepaid freight of $810 added to the invoice. 6 Returned merchandise with an invoice amount of $13,500 ($18,000 list price less trade discount of 25%) purchased on November 3 from Moonlight Co. 8 Sold merchandise on account to Quinn Co., $15,600 with terms n/15. The cost of the goods sold was $9,400. 13 Paid Moonlight Co. on account for purchase of November 3, less return of November 6. 14 Sold merchandise with a list price of $236,000 to customers who used VISA and who redeemed $8,000 of pointof- sale coupons. The cost…arrow_forwardHello teacher please solve this questionsarrow_forwardHelp me to solve this questionsarrow_forward
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