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The following financial information regarding Wick Industries is available: Wick would like to increase its return to stockholders. To do

Question:

The following financial information regarding Wick Industries is available:
The following financial information regarding Wick Industries is available:Wick would

Wick would like to increase its return to stockholders. To do so, it wants to increase its debt to assets ratio to 0.70 by issuing debt and buying back common stock.
Required
a. Calculate Wick's current debt to equity, debt to assets, and times interest earned ratios.
b. How much debt would Wick have to issue to buy enough common stock to raise its debt to assets ratio to 0.70?
c. What would concern you about Wick's plan?

Common Stock
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...
Transcribed Image Text:

Total liabilities Total equity Total assets Income tax expense Net income Operating cash flows Interest expense $150,000 400,000 550,000 20,000 35,000 125,000 15,000

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a Ratio Formula Wicks Ratios Debt to assets Total liabilities Total assets 150 000 550 000 …View the full answer


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Financial ACCT2

Financial ACCT2

ISBN: 978-1111530761

2nd edition

Authors: Norman H. Godwin, C. Wayne Alderman

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Question Posted: July 16, 2015 05:01:01
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