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 $256,000 $231,000 $206,000 Notes payable (8% interest) 90,000 90,000 90,000 Common stock 36,000 36,000 36,000 Preferred 3% stock, $100 par 18,000 18,000 18,000 (no change during year) Retained earnings 102,285 72,865 54,000 The 20Y7 net income was $29,960, and the 20Y6 net income was $19,405. N
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 $256,000 $231,000 $206,000 Notes payable (8% interest) 90,000 90,000 90,000 Common stock 36,000 36,000 36,000 Preferred 3% stock, $100 par 18,000 18,000 18,000 (no change during year) Retained earnings 102,285 72,865 54,000 The 20Y7 net income was $29,960, and the 20Y6 net income was $19,405. N
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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. Since the return on assets is
the return on stockholders' equity in both years, there must be
leverage from the use of debt.
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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 | $256,000 | $231,000 | $206,000 | ||||
| Notes payable (8% interest) | 90,000 | 90,000 | 90,000 | ||||
| Common stock | 36,000 | 36,000 | 36,000 | ||||
| 18,000 | 18,000 | 18,000 | |||||
| (no change during year) | |||||||
| 102,285 | 72,865 | 54,000 |
The 20Y7 net income was $29,960, and the 20Y6 net income was $19,405. 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 return on total assets, the return on
| 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
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