Spahn Company manufactures backpacks. During 2022, Spahn issued bonds at 10% interest and used the cash proceeds to purchase treasury stock. The following financial information is available for Spahn Company for the years 2022 and 2021.
Instructions
a. Use the information above to calculate the following ratios for both years: (1) return on assets, (2) return on common stockholders’ equity, (3) payout ratio, (4) debt to assets ratio, and (5) times interest earned.
b. Referring to your findings in part (a), discuss the changes in the company’s profitability from 2021 to 2022.
c. Referring to your findings in part (a), discuss the changes in the company’s from 2021 to 2022.
d. Based on your findings in (b), was the decision to issue debt to purchase common stock a wise one?
