Edgemont Repairs began operations on January 1, 2013. The 2013, 2014, and 2015 financial statements follow:

On January 1, 2015, the company expanded operations by taking out a $40,000 long-term loan at a 10 percent annual interest rate.

REQUIRED:
a. Compute return on equity, return on assets, common equity leverage, capital structure leverage, profit margin, and asset turnover.
b. On January 1, 2015, the company€™s common stock was selling for $20 per share. Assume that Edgemont issued 2,000 shares of stock, instead of borrowing the $40,000, to raise the cash needed to pay for the January 1 expansion. Recompute the ratios in (a) for 2015. Ignore any tax effects.
c. Should the company have issued the equity instead of borrowing the funds?Explain.

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2015 2014 2013 Assets Current assets Noncurent assets 30,000 83,000 $113,000 $10,000 45,000 $55,000 $ 8,000 41,000 $49,000 Total assets Liabilities and Shareholders' Equit Current liabilities Long-term liabilities Shareholders' equity $12,000 50,000 51,000 $7,000 10,000 38,000 5,000 10,000 34,000 Total liabilities and $113,000 70,000 27,000 5,000 13,000 25,000 12,000 10,000 $55,000 $45,000 24,000 1,000 6,000 $14,000 $10,000 10,000 $49,000 $37,000 24,000 1,000 6,000 6,000 $2,000 10,000 shareholders' equity Revenues Operating expenses Interest expense Income taxes Net income Dividends Number of shares outstanding