Parcells Company manufactures backpacks. During 2010 Parcells issued bonds at 10% interest and used the cash proceeds to purchase treasury stock. The following financial information is available for Parcells Company for the years 2010 and 2009.

Instructions
(a) Use the information above to calculate the following ratios for both years: (i) return on assets ratio, (ii) return on common stockholders€™ equity ratio, (iii) payout ratio, (iv) debt to total assets ratio, (v) times interest earned ratio.
(b) Referring to your findings in part (a), discuss the changes in the company€™s profitability from 2009 to 2010.
(c) Referring to your findings in part (a), discuss the changes in the company€™s solvency from 2009 to 2010.
(d) Based on your findings in (b), was the decision to issue debt to purchase common stock a wiseone?

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2010 2009 Sales Net income Interest expensc Tax expense Dividends paid Total assets (ycar-end) Average total assets Total liabilities (year-end) Aver. total common stockholders' equity S9,000,000 2,240,000 500,000 670,000 890,000 14,500,000 14,937,500 6,000,000 9,400,000 9,000,000 2,600,000 140,000 780,000 1,026,000 16,875,000 17,647,000 3,000,000 14,100,000