Emporia Plastics, Inc.
| Operating income | $532,150 | |
| Bond interest expense | 135,000 | |
| 397,150 | ||
| Income taxes | 183,432 | |
| Net income | $213,718 | |
| Bonds payable | $1,000,000 | |
| Common stock | 875,000 | |
| Retained earnings | 375,000 |
Instructions
a. Compute the return on common stockholders’ equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.)
b. Is Emporia Plastics, Inc. trading on the equity successfully? Explain.
