Presented below is information from the annual report of DeVries Plastics.
Operating income..............................................€ 532,150
Bond interest expense...........................................135,000
Income before income tax......................................397,150
Income tax.......................................................183,432
Net income.....................................................€ 213,718
Bonds payable..............................................€ 1,500,000
Share capital-ordinary........................................875,000
Retained earnings...............................................575,000
Instructions
a. Compute the return on ordinary share equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.)
b. Is DeVries Plastics trading on the equity successfully? Explain.