Presented below is information from the annual report of Potter Plastics, Inc. Operating income .........$ 532,150 Bond
Question:
Presented below is information from the annual report of Potter Plastics, Inc.
Operating income .........$ 532,150
Bond interest expense .........135,000
.........397,150
Income taxes ...........183,432
Net income ...........$ 213,718
Bonds payable ..........$1,500,000
Common stock ...........875,000
Retained earnings .........575,000
Instructions
(a) Compute the return on common stock equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.)
(b) Is Potter Plastics, Inc. trading on the equity successfully? Explain.
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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