Homework Answers
b.
Return on common stock equity = Net income / Total common stock equity
Marigold = $856,800 / 2,608,000 ($1,860,000+748,000) = 32.85%
Swifty = $944,000 / 3,828,000 ($3,080,000+748,000) = 24.66%
Marigold company is more profitable in terms of return on common stockholders' equity
c.
Net income per share = Net income / Common shares outstanding
Marigold = $856,800 / 93,000 ($1,860,000/$20) = $9.21
Swifty = $944,000 / 154,000 ($3,080,000/$20) = $6.13
Marigold company has the greater net income per share of stock.
d1.
Yes, it is advantageous to the stockholders of Marigold Co. to have long term debt outstanding.
e.
Book value per share = Common stock+Retained earnings / Number of common stock outstanding
Marigold = $2,608,000 / 93,000 = $28.04
Swifty = $3,828,000 / 154,000 = $24.86
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Management expected that, had it not issued the debt, it would have
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