Question

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

Answer 1

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)