20Y8 20Y7 20Υ6 20YS 20Υ4 $ 800,000 $ 273,406 $ 367,976 $ 631,176 $ 884,000 616,047 31,749 4,417,178 Net income Interest expense 572,003 528,165 495,000 440,000 Income tax expense 53,560 106,720 160,000 200,000 Total assets (ending balance) Total stockholders' equity (ending balance) Average total assets Average total stockholders' equity 3,569,855 4,124,350 3,732,443 3,338,500 2,750,000 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 3,249,164 2,749,588 1,992,000 1,150,000 20Y4-20Y8 Return on total assets 28% Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders' equity 0.4

20Y8 20Y7 20Υ6 20YS 20Υ4 $ 800,000 $ 273,406 $ 367,976 $ 631,176 $ 884,000 616,047 31,749 4,417,178 Net income Interest expense 572,003 528,165 495,000 440,000 Income tax expense 53,560 106,720 160,000 200,000 Total assets (ending balance) Total stockholders' equity (ending balance) Average total assets Average total stockholders' equity 3,569,855 4,124,350 3,732,443 3,338,500 2,750,000 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 3,249,164 2,749,588 1,992,000 1,150,000 20Y4-20Y8 Return on total assets 28% Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders' equity 0.4

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter3: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 55P

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Question

Solvency and profitability trend analysis Addai Company has provided the following comparative information:

You have been asked to evaluate the historical performance of the company over the la.st five years.

Selected industry ratios have remained relatively steady at the following levels for the last five years:

Instructions

1. Prepare four line graphs with the ratio on the vertical axis and the years on the horizontal axis for the following four ratios (round 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 industry benchmark on each graph. That is, each graph should have two lines.

2. Prepare an analysis of the graphs in (1).

20Y8
20Y7
20Υ6
20YS
20Υ4
$ 800,000
$ 273,406 $ 367,976 $ 631,176 $ 884,000
616,047
31,749
4,417,178
Net income
Interest expense
572,003
528,165
495,000
440,000
Income tax expense
53,560
106,720
160,000
200,000
Total assets (ending balance)
Total stockholders' equity
(ending balance)
Average total assets
Average total stockholders' equity 3,569,855
4,124,350
3,732,443
3,338,500
2,750,000
3,706,557
3,433,152
3,065,176
2,434,000
1,550,000
4,270,764
3,928,396
3,535,472
3,044,250
2,475,000
3,249,164
2,749,588
1,992,000
1,150,000

20Y4-20Y8
Return on total assets
28%
Return on stockholders' equity
18%
Times interest earned
2.7
Ratio of liabilities to stockholders' equity 0.4

Definition Definition Assets available to stockholders after a company's liabilities are paid off. Stockholders’ equity is also sometimes referred to as owner's equity. A stockholders’ equity or book value generally includes common stock, preferred stock, and retained earnings and is an indicator of a company's financial strength.

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