Question

Seven metrics The following data were taken from the financial statements of Woodwork Enterprises Inc. for the current fiscal year. Assuming that there are no intangible assets. Property, plant, and equipment (net) $1,236,800 Liabilities: Current liabilities $154,000 Mortgage note payable, 10%, ten-year note issued two years ago 773,000 Total liabilities $927,000 Stockholders' equity: Preferred $4 stock, $100 par (no change during year) $556,200 Common stock, $10 par (no change during year) 556,200 Retained earnings: Balance, beginning of year $594,000 Net income 282,000 $876,000 Preferred dividends $22,248 Common dividends 112,152 134,400 Balance, end of year 741,600 Total stockholders' equity $1,854,000 Sales $6,074,300 Interest expense $70,495 Beginning-of-the-year amounts: Property, plant, and equipment (net) $ 1,391,000 Total assets 2,642,000 Retained earnings 594,000 Determine the following: (a) debt ratio, (b) ratio of fixed assets to long-term liabilities, (c) ratio of liabilities to stockholders’ equity, (d) asset turnover, (e) return on total assets, (f) return on stockholders’ equity, and (g) return on common stockholders' equity. Round to two decimal places.

a.	Debt ratio	%
b.	Ratio of fixed assets to long-term liabilities
c.	Ratio of liabilities to stockholders’ equity
d.	Asset turnover
e.	Return on total assets	%
f.	Return on stockholders’ equity	%
g.	Return on common stockholders’ equity	%

Answer 1

a.	Debt ratio	33%
b.	Ratio of fixed assets to long-term liabilities	1.6
c.	Ratio of liabilities to stockholders’ equity	0.5
d.	Asset turnover	2.22
e.	Return on total assets	10.40%
f.	Return on stockholders’ equity	15.84%
g.	Return on common stockholders’ equity	4.83%

DEBT RATIO	TOTAL LIABILITIES/TOTAL ASSETS
	(154000+773000)/2781000
	33%
FIXED ASSETS TO LONG TERM LIABILITIES	1236800/773000
	1.6
Ratio of liabilities to stockholders’ equity	(154000+773000)/1854000
	0.5
ASSETS TURNOVER RATIO	NET SALES/AVERAGE TOTAL ASSETS
	6034300/(2642000+2781000)2
	2.225447169
Return on total assets	NET INCOME/AVERAGE TOTAL ASSETS
	282000/(2642000+2781000)2
	0.104001475
Return on stockholders’ equity	NET INCOME/AVERAGE STAKEHOLDER EQUITY
	282000/1780200
	15.84091675
Return on common stockholders’ equity	NET INCOME-PREF DIVIDEND/AVERAGE COMMON STOCK
	(282000-222848)/1224000
	4.832679739