Question

Hercules Company manufactures raingear. During 2014, Hercules Company decided to issue bonds at 8% interest and then used the cash to purchase a significant amount of treasury stock. The following information is available for Hercules Company.


Instructions
a) Use the information above to calculate the following ratios for both years: (i) return on assets, (ii) return on common stockholders’ equity, (iii) payout ratio, (iv) debt to assets ratio, and (v) times interest earned.
(b) Referring to your findings in part (a), discuss the changes in the company’s profitability from 2013 to 2014.
(c) Referring to your findings in part (a), discusses the changes in the company’s solvency from 2013 to 2014.
(d) Based on your findings in (b), was the decision to issue debt to purchase common stock a wiseone?


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  • CreatedApril 07, 2014
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