Mann Corporation Decided to Issue Common Stock and Used the $120,000

question 217

Essay

Mann Corporation decided to issue common stock and used the $120,000 proceeds to retire all of its outstanding bonds on January 1, 2014. The following information is available for the company for 2013 and 2014. Instructions
(a) Compute the return on common stockholders' equity for both years.
(b) Explain how it is possible that net income increased, but the return on common stockholders' equity decreased.
(c) Compute the debt to assets ratio for both years, and comment on the implications of this change in the company's solvency.

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Definitions:

Loan Date

The date on which a loan agreement is signed and the funds are disbursed to the borrower.

Economic Value

Refers to the total value that an asset generates, encompassing both its direct financial performance and indirect benefits.

Interest Rate

The percentage charged on a loan or paid on savings or investments, typically expressed as an annual percentage of the principal.

Final Payment

The last payment made on a loan, debt, or financing agreement, completing the repayment obligation.