Manning Company Has $1,000,000 in Assets and $1,000,000 in Stockholders

question 10

Essay

Manning Company has $1,000,000 in assets and $1,000,000 in stockholders' equity, with 50,000 shares outstanding the entire year. It has a return on assets ratio of 9%. In the past year it had net income of $75,000. On January 1, 2014, it issued $300,000 in debt at 5% and immediately repurchased 25,000 shares for $300,000. Management expected that, had it not issued the debt, it would have again had net income of $75,000.
Instructions
(a) Determine the Company's net income and earnings per share for 2013 and 2014. (Ignore taxes in your computations.)
(b) Compute the Company's return on common stockholders' equity for 2013 and 2014.
(c) Compute the company's debt to assets ratio for 2013 and 2014.

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Definitions:

Corporate Social Responsibility

A business model that helps a company be socially accountable to itself, its stakeholders, and the public.

Social Change

Significant alterations over time in behavior patterns, cultural values and norms, and societal structures.

Business Value

The importance or worth that a company or project brings to stakeholders, including financial profitability, brand reputation, and customer satisfaction.

Key Message

A core piece of information or value proposition that an organization seeks to communicate to its audience.