1 answer

1,867,500 Common stock, $10 par (no change during year) Retained earnings: Balance, beginning of year Net...

Question:

1,867,500 Common stock, $10 par (no change during year) Retained earnings: Balance, beginning of year Net Income $1,992,000 6




Six Measures of Solvency or Profitability The following data were taken from the financial statements of Gates Inc. for the c
1,867,500 Common stock, $10 par (no change during year) Retained earnings: Balance, beginning of year Net Income Preferred di
1,867,500 Common stock, $10 par (no change during year) Retained earnings: Balance, beginning of year Net Income $1,992,000 688,000 $74,700 $2,680,000 Preferred dividends Common dividends 115,300 190,000 Balance, end of year 2,490,000 $6,225,000 Total stockholders' equity Sales $48,071,100 Interest expense $62,220 Assuming that total assets were $7,097,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place. a. Ratio of fixed assets to long-term liabilities b. Ratio of liabilities to stockholders' equity C. Asset turnover d. Return on total assets e. Return on stockholders' equity f. Return on common stockholders' equity
Six Measures of Solvency or Profitability The following data were taken from the financial statements of Gates Inc. for the current fiscal year. $1,555,500 Property, plant, and equipment (net) Liabilities: Current liabilities $208,000 1,037,000 Note payable, 6%, due in 15 years $1,245,000 Total liabilities $1,867,500 Stockholders' equity: Preferred $4 stock, $100 par (no change during year) Common stock, $10 par (no change during year) Retained earnings: Balance, beginning of year 1,867,500 $2,680,000 Net income $1,992,000 688,000 $74,700 115,300 Preferred dividends Common dividends 190,000 2,490,000 Balance, end of year Total stockholders' equity $6,225,000 $48,071,100 Sales
1,867,500 Common stock, $10 par (no change during year) Retained earnings: Balance, beginning of year Net Income Preferred dividends Common dividends Balance, end of year $2,680,000 $1,992,000 688,000 $74,700 115,300 190,000 2,490,000 Total stockholders' equity $6,225,000 Sales $48,071,100 Interest expense $62,220 Assuming that total assets were $7,097,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place. a. Ratio of fixed assets to long-term liabilities b. Ratio of liabilities to stockholders' equity C. Asset turnover d. Return on total assets e. Return on stockholders' equity f. Return on common stockholders' equity

Answers

Ratio of Fixed Assets to long-term to long-term liabilities:
Total Fixed Assets/Total long-term liabilities 1.5 $1,555,500/$1,037,000
Ratio of Liabilities to stockholder's equity:
Total Liabilities / Total stockholder's equity: 0.2 $1,245,000/$6,225,000
Asset Turnover:
Net Sales / Average Total Assets 6.6 $48,071,100 / [($7,097,000+$7,470,000)/2]
Return on Assets:
Return on Assets =Net Income / Average Total Assets 9.4% $688,000/$7,283,500
Return on equity:
Return on equity =Net Income / Average Shareholders equity 11.1% $688,000/$6,225,000
Return on common stockholders equity:
Return on equity =Net Income / Average common Shareholders equity 15.5% $688,000/($6,225,000-$1,867,500+$74,700)
.

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