Concord Company manufactures backpacks. During 2017, Concord issued bonds at 12%

Question

Concord Company manufactures backpacks. During 2017, Concord issued bonds at 12% interest and used the cash proceeds to purchase treasury stock. The following financial information is available for Concord Company for the years 2017 and 2016. 2017 2016 Sales revenue $17,100,000 $17,100,000 Net income 4,256,000 4,750,000 Interest expense 1,400,000 392,000 Tax expense Dividends paid on common stock 2,492,000 2,872,800 Dividends paid on preferred stock 840,000 840,000 Total assets (year-end) 27,550,000 32,062,500 Average total assets 43,925,000 49,736,400 Total liabilities (year-end) 16,800,000 8,400,000 Avg. total common stockholders' equity 26,320,000 39,480,000 1,273,000

Explanation / Answer

Calculation:

Formula for ROA= Net income/Average assets

Formula for Return on stock holder's equity =Net income/Average total common Stock holders equity.

Formula for pay out ratio= dividend paid to common stock holders/Net income available to common stock holders.

Formula for debts/assets ratio = Total liabilities/Total Assets.

Formula for times interest earned= Income before interest and taxes/Interest expense.

S.No Particulars 2017 2018 1 Return on assets Return(1) 4256000 4750000 Average total assets(2) 43925000 49736400 Return on assets(3)=(1)/(2) 9.7% 9.6% 2 Return on common stock holder's equity Return(4) 4256000 4750000 Average total common stock holders equity(5) 26320000 39480000 Return on common stock holder's equity(6)=(4)/(5) 16.2% 12.0% 3 Payout ratio Dividends paid to common stock holders(7) 2492000 2872800 Net income to common stock holders(8)net inomce- dividends to pref share holders 3416000 3910000 Payout ratio(9)=(7)/(8) 73.0% 73.5% 4 Debt to assets ratio Total liabilities(10) 16800000 8400000 Total assets(year end)(11) 27550000 32062500 Debt to assets ratio(12)=(10)/(11) 61.0% 26.2% 5 Times interest earned Net income(13) 4256000 4750000 Tax expense(14) 1273000 1425000 Profit before tax(15)=(13)+(14) 5529000 6175000 Add: Interest(16) 1400000 392000 Profit before interest and tax(17)=(15)+(16) 6929000 6567000 Interest(18) 1400000 392000 Times interest earned(19)=(17)/(18) 4.9 16.8

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.