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Discuss used the cash proceeds to purchase treasury stock

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Cepeda Company manufactures backpacks. During 2014, Cepeda issued bonds at 11% interest and used the cash proceeds to purchase treasury stock. The following financial information is available for Cepeda Company for the years 2014 and 2013.

2014 2013
Sales revenue $12,114,000 $12,114,000
Net income 3,015,040 3,365,000
Interest expense 708,000 198,240
Tax expense 901,820 1,009,500
Dividends paid on common stock 1,260,240 1,452,816
Dividends paid on preferred stock 424,800 424,800
Total assets (year-end) 19,517,000 22,713,750
Average total assets 22,213,500 25,152,408
Total liabilities (year-end) 8,496,000 4,248,000
Avg. total common stockholders' equity 13,310,400 19,965,600

(a) Use the information above to calculate the following ratios for both years: (Round answers to 1 decimal place, e.g. 12.5% or 12.5.)

2014 2013
(i) Return on assets   %   %
(ii) Return on common stockholders' equity   %   %
(iii) Payout ratio   %   %
(iv) Debt to assets ratio   %   %
(v) Times interest earned    times    times

 

Reference no: EM131758501

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