Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders’ equity for the years 20Y6 and 20Y7. Round percentages to one decimal place. 20Y7 20Y6 Return on total assets fill in the blank 1% fill in the blank 2% Return on stockholders' equity fill in the blank 3% fill in the blank 4% Return on common stockholders’ equity fill in the blank 5% fill in the blank 6% b. The profitability ratios indicate that the company's profitability has . Because the return on common stockholders' equity the return on total assets in both years, there is leverage from the use of debt
Profitability Ratios
The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5:
| December 31 | |||||||
| 20Y7 | 20Y6 | 20Y5 | |||||
| Total assets | $5,200,000 | $5,000,000 | $4,800,000 | ||||
| Notes payable (6% interest) | 2,500,000 | 2,500,000 | 2,500,000 | ||||
| Common stock | 250,000 | 250,000 | 250,000 | ||||
| (no change during year) | 500,000 | 500,000 | 500,000 | ||||
| 1,574,000 | 1,222,000 | 750,000 |
The 20Y7 net income was $411,000, and the 20Y6 net income was $462,500. No dividends on common stock were declared between 20Y5 and 20Y7. Preferred dividends were declared and paid in full in 20Y6 and 20Y7.
a. Determine the
| 20Y7 | 20Y6 | |
| Return on total assets | fill in the blank 1% | fill in the blank 2% |
| Return on stockholders' equity | fill in the blank 3% | fill in the blank 4% |
| Return on common stockholders’ equity | fill in the blank 5% | fill in the blank 6% |
b. The profitability ratios indicate that the company's profitability has . Because the return on common stockholders'
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