Question

Return on total assets

PR 145B Crosby Company has provided the following comparative information: Solvency and profitability trend analysis 1.8. 20Y7, 32.9% 20Y5 . 20Y6 20Y4 20Y7 20Y8 51A00 610,000 5000 1,052,060 891,576 768,600 1,225,572845,222 640,320 441,600 $ 5,571,720 $ 3,714,480 $2,772,000 $ 1,848 Net income Interest expense Income tax expense Total assets (ending balance) Total stockholders' equity 0,152000 29,378,491 22,598,839 17,120,333 12,588,480 101 (ending balance) Average total assets 18,706,200 13,134,480 9,420,000 6,648,000 25,988,665 19,859,586 14,854,406 11,370,240 8,67600 Average total stockholders equity15,920.340 11,277,240 8,034,000 5,724,000 4100.0 You have been asked to evaluate the historical performance of the company over the lastfho years. Selected industry ratios have remained relatively steady at the following levels for the he five years: Return on total assets Return on stockholders' equity Times interest earned Ratio of liabilities to stockholders' equity 20Y4-20YS 196 26% 3.4 1.4 Instructions 1. Prepare four line graphs with the ratio on the vertical axis and the years on the axis for the following four ratios (round ratios and percentages to one decimal place A. Return on total assets B. Return on stockholders' equity C. Times interest earned D. Ratio of liabilities to stockholders' equity Display both the company ratio and the induo graph should hae t

Answer 1

1	Return on assets = net income / Average total assets
		2008	2007	2006	2005	2004
	Net income	5571720	3714480	2772000	1848000	1400000
	Average total assets	25988665.00	19859586	14854406	11370240	8676000
	Return on assets	21.4%	18.7%	18.7%	16.3%	16.1%
2	Return on commonstockholders equity = net income / total stockholders equity
		2008	2007	2006	2005	2004
	Net income	5571720	3714480	2772000	1848000	1400000
	Average stockholders equity	15920340	11277240	8034000	5724000	4100000
	Return on stockholders equity	35.0%	32.9%	34.5%	32.3%	34.1%
3	Times interest charged = EBIT / interest expense
	EBIT = net income + income tax + interest expense	2008	2007	2006	2005	2004
	Net income	5571720	3714480	2772000	1848000	1400000
	Income taxes	1225572	845222	640320	441600	320000
	Interest expense	1052060	891576	768600	610000	500000
	EBIT	7849352	5451278	4180920	2899600	2220000
	Times interest charged	7.5	6.1	5.4	4.8	4.4
4	Liabilities to stockholders equity = total liabilities / stockholders equity
	Total assets	29378491	22598839	17120333	12588480	10152000
Less	Total stockholders equity	18706200	13134480	9420000	6648000	4800000
	Total liabilities	10672291	9464359	7700333	5940480	5352000
	Stockholders equity	18706200	13134480	9420000	6648000	4800000
	Liabilities to stockholders equity	0.57	0.72	0.82	0.89	1.12