Cepeda Company manufactures backpacks. During 2014, Cepeda issued bonds at

Cepeda Company manufactures backpacks. During 2014, Cepeda issued bonds at 10%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.


Cepeda Company manufactures backpacks. During 2014, Cepeda issued bonds at


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?

Solvency
Solvency means the ability of a business to fulfill its non-current financial liabilities. Often you have heard that the company X went insolvent, this means that the company X is no longer able to settle its noncurrent financial...

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