Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders’ equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 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 Required: 1. Determine the following for the years 20Y4 through 20Y8 for each of the graphs below. Use the amounts given above in your calculations. Round to one decimal place: a. Return on total assets:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Solvency and Profitability Trend Analysis

(Picture is attached and this is the only one I got wrong, what did I do wrong?)

Addai Company has provided the following comparative information:

	20Y8	20Y7	20Y6	20Y5	20Y4
Net income	$273,406		$367,976		$631,176	$884,000	$800,000
Interest expense	616,047		572,003		528,165	495,000	440,000
Income tax expense	31,749		53,560		106,720	160,000	200,000
Total assets (ending balance)	4,417,178		4,124,350		3,732,443	3,338,500	2,750,000
Total stockholders’ equity (ending balance)	3,706,557		3,433,152		3,065,176	2,434,000	1,550,000
Average total assets	4,270,764		3,928,396		3,535,472	3,044,250	2,475,000
Average total stockholders' equity	3,569,855		3,249,164		2,749,588	1,992,000	1,150,000

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

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

	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

Required:

1. Determine the following for the years 20Y4 through 20Y8 for each of the graphs below. Use the amounts given above in your calculations. Round to one decimal place:

a. Return on total assets:

The image appears to be from an online educational resource related to Chapter 14 Homework (Application).

**Chart Overview:**
The chart presents data on "Return on Total Assets" over a five-year period from 2019 to 2014. It compares the return on total assets for a particular company with the industry average.

- **X-Axis (Horizontal):** Represents the years from 2019 to 2014.
- **Y-Axis (Vertical):** Displays the percentage of return on total assets, ranging from 0% to 60%.

**Data Represented:**

1. **Company's Return on Total Assets (Line with Dots):**
- 2019: 20.9%
- 2018: 24.1%
- 2017: 31.3%
- 2016: 46.1%
- 2015: 52.4%

2. **Industry Return on Total Assets (Solid Line):**
- Remains constant over the years, depicted as a flat line.

**Trend Analysis:**
- The company's return on total assets shows an upward trend over the years, indicating increasing financial performance.
- The industry average remains stable over the same period.

The graph provides a visual comparison of the company's performance against the industry standard, highlighting the company's growth in asset returns during the specified timeframe.

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