Solvency and Profitability Trend Analysis(Part A is the only one I got incorrect, let me know what the correct answers are)Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4Net income$273,406 $367,976 $631,176 $884,000 $800,000 Interest expense616,047 572,003 528,165 495,000 440,000 Income tax expense31,749 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 assets4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity3,569,855 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: 20Y4–20Y8Return on total assets28% Return on stockholders’ equity18% Times interest earned2.7 Ratio of liabilities to stockholders’ equity0.4 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:20Y8fill in the blank %20Y7fill in the blank %20Y6fill in the blank %20Y5fill in the blank %20Y4fill in the blank % The image contains a line graph titled "Return on Total Assets," which compares the company's return on total assets with the industry's return from the years 20Y8 to 20Y4.**Graph Details:**- **X-axis:** Represents the years from 20Y8 to 20Y4.- **Y-axis:** Represents the percentage of return on total assets, ranging from 0% to 60%.- Two data lines are presented: - **Company's Return on Total Assets:** Denoted by a line with circular markers that shows an increasing trend from around 10% in 20Y8 to nearly 50% in 20Y4. - **Industry Return on Total Assets:** Denoted by a line with square markers that remains constant, approximately at 25% throughout the years.Below the graph, specific percentages for the company's return on total assets are provided for three years, along with an indication of correctness:- 20Y8: 12.0% (X - incorrect)- 20Y7: 9.4% (X - incorrect)- 20Y6: 17.9% (X - incorrect)A button labeled "Check My Work" is visible at the bottom of the form. **Chapter 14 Homework (Application)**The content includes a graph titled "Return on Total Assets" plotted against the years from 20Y8 to 20Y4. The graph contains two lines:1. **Company's Return on Total Assets**: This line is marked with circles and shows an upward trend over the years. - 20Y8: Approximately 15% - 20Y7: Around 25% - 20Y6: Close to 30% - 20Y5: About 40% - 20Y4: Reaches nearly 50%2. **Industry Return on Total Assets**: This line is marked with squares and remains fairly constant throughout the years, slightly above 20%.Below the graph, there is a table with incorrect values (marked with an "X") for each year:- 20Y8: 12.0%- 20Y7: 9.4%- 20Y6: 17.9%- 20Y5: 29.0%- 20Y4: 32.3%This graph and table are featured in a homework section focused on analyzing the return on total assets for a company compared to the industry. Students are expected to identify discrepancies and make corrections based on the graphical data.**Note**: The exercise encourages learners to evaluate quantitative data and improve their understanding of financial trends and comparisons.

Return on total assets = (Net Income + Interest expense)/ Average Total assets where, Average Total…

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: 20Y8 fill in the blank % 20Y7 fill in the blank % 20Y6 fill in the blank % 20Y5 fill in the blank % 20Y4 fill in the blank %

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

(Part A is the only one I got incorrect, let me know what the correct answers are)

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:

20Y8	fill in the blank %
20Y7	fill in the blank %
20Y6	fill in the blank %
20Y5	fill in the blank %
20Y4	fill in the blank %

The image contains a line graph titled "Return on Total Assets," which compares the company's return on total assets with the industry's return from the years 20Y8 to 20Y4.

**Graph Details:**
- **X-axis:** Represents the years from 20Y8 to 20Y4.
- **Y-axis:** Represents the percentage of return on total assets, ranging from 0% to 60%.
- Two data lines are presented:
- **Company's Return on Total Assets:** Denoted by a line with circular markers that shows an increasing trend from around 10% in 20Y8 to nearly 50% in 20Y4.
- **Industry Return on Total Assets:** Denoted by a line with square markers that remains constant, approximately at 25% throughout the years.

Below the graph, specific percentages for the company's return on total assets are provided for three years, along with an indication of correctness:
- 20Y8: 12.0% (X - incorrect)
- 20Y7: 9.4% (X - incorrect)
- 20Y6: 17.9% (X - incorrect)

A button labeled "Check My Work" is visible at the bottom of the form.

**Chapter 14 Homework (Application)**

The content includes a graph titled "Return on Total Assets" plotted against the years from 20Y8 to 20Y4. The graph contains two lines:

1. **Company's Return on Total Assets**: This line is marked with circles and shows an upward trend over the years.
- 20Y8: Approximately 15%
- 20Y7: Around 25%
- 20Y6: Close to 30%
- 20Y5: About 40%
- 20Y4: Reaches nearly 50%

2. **Industry Return on Total Assets**: This line is marked with squares and remains fairly constant throughout the years, slightly above 20%.

Below the graph, there is a table with incorrect values (marked with an "X") for each year:

- 20Y8: 12.0%
- 20Y7: 9.4%
- 20Y6: 17.9%
- 20Y5: 29.0%
- 20Y4: 32.3%

This graph and table are featured in a homework section focused on analyzing the return on total assets for a company compared to the industry. Students are expected to identify discrepancies and make corrections based on the graphical data.

**Note**: The exercise encourages learners to evaluate quantitative data and improve their understanding of financial trends and comparisons.

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