Problem 11-7A Mangold Company manufactures backpacks. During 2017, Mangold issue

Question

Problem 11-7A Mangold Company manufactures backpacks. During 2017, Mangold issued bonds at 12% interest and used the cash for Marigold Company for the years 2017 and 2016. proceeds to purchase treasury sto me to ing na cal information is avalable 2016 2017 12,600,000 $12,600,000 Sales revenue Net income Interest expense Tax expense Dividends paid on common stock Dividends paid on preferred stock Total assets (year-end) 3,136,000 3,500,000 252,000 938,0003,050,000 1,602,0001,846,800 40,000 20,300,000 23,625,000 28,237,500 31,973,400 10,800,0005,400,000 Average total assets Total liabilities (year-end) Avg total common stockholders' equity 16.920,000 25,380,000 Use the information above to calculate the following ratios for both years: (Round answers to decimal place, e.g. 12.5% or 12.5.) 2017 (1) (2) (3) Return on assers Return on common stockholders equity Payout ratio s Reserved. A DivsieoWl 9 2 3 5

Explanation / Answer

Formula 2017 2016 Return on assets Net income/Total assets *100 31,36,000/28,237,500*100 = 11.11% 3500000/31973400*100 = 10.95% Return on common stockholder's equity Net income/stockholder's equity*100 31,36,000/16920,000*100 = 18.53% 3500000/25380,000*100 = 13.79% Payout ratio Dividend paid/Net income (1602000+540000)/31,36,000= 68.30% (1846800+540000)/3500000 = 68.19% Debt to assets ratio Total debt/Total assets 10,800,000/20,300,000= 0.532 54,00,000/23,625,000=0.228 Time interest earned EBIT/Interest Exp (31,36,000+9,00,000+938000)/900000=5.53 times (3500000+252000+1050000)/252000 =19.05 times

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