Sat 11:37 PM Window Help "iew History Bookmarks v2.cengagenow.com Print Item Calculator Show Me How eBook rontabmTcy Natios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5: December 31 20Y5 20Y6 20Y7 $4,000,000 $4,400,000 $4,800,000 Total assets Notes payable (8% interest) 2,250,000 2,250,000 2,250,000 250,000 250,000 250,000 Common stock Preferred 4% stock, $100 par (no change during year) 500,000 500,000 500,000 Retained earnings 1,574,000 1,222,000 750,000 The 20Y7 net income was $372,000, and the 20Y6 net income was $492,000. 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 rate earned on stockholders' equity, and the return on common stockholders' equity for the years 2OY6 and 20Y7. Round to one decimal place. 20Y7 20Y6 Return on total assets 12.0 % 16.0 Rate earned on stockholders' equity % Return on common stockholders' equity b. The profitability ratios indicate that Vidahill Inc.'s profitability has deteriorated Because the rate of return on common stockholders' equity exceeds the rate earned on total assets in both years, there is positive leverage from the use of debt. Check My Work Previous Next All work saved. Save and Exit Submit Assignment for Grading JUL
Sat 11:37 PM Window Help "iew History Bookmarks v2.cengagenow.com Print Item Calculator Show Me How eBook rontabmTcy Natios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5: December 31 20Y5 20Y6 20Y7 $4,000,000 $4,400,000 $4,800,000 Total assets Notes payable (8% interest) 2,250,000 2,250,000 2,250,000 250,000 250,000 250,000 Common stock Preferred 4% stock, $100 par (no change during year) 500,000 500,000 500,000 Retained earnings 1,574,000 1,222,000 750,000 The 20Y7 net income was $372,000, and the 20Y6 net income was $492,000. 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 rate earned on stockholders' equity, and the return on common stockholders' equity for the years 2OY6 and 20Y7. Round to one decimal place. 20Y7 20Y6 Return on total assets 12.0 % 16.0 Rate earned on stockholders' equity % Return on common stockholders' equity b. The profitability ratios indicate that Vidahill Inc.'s profitability has deteriorated Because the rate of return on common stockholders' equity exceeds the rate earned on total assets in both years, there is positive leverage from the use of debt. Check My Work Previous Next All work saved. Save and Exit Submit Assignment for Grading JUL
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The following selected data were taken from the financial statements of Vidahill inc
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The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5:
December 31
20Y5
20Y6
20Y7
$4,000,000
$4,400,000
$4,800,000
Total assets
Notes payable (8% interest)
2,250,000
2,250,000
2,250,000
250,000
250,000
250,000
Common stock
Preferred 4% stock, $100 par
(no change during year)
500,000
500,000
500,000
Retained earnings
1,574,000
1,222,000
750,000
The 20Y7 net income was $372,000, and the 20Y6 net income was $492,000. 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 rate earned on stockholders' equity, and the return on common stockholders' equity for the years 2OY6
and 20Y7. Round to one decimal place.
20Y7
20Y6
Return on total assets
12.0 %
16.0
Rate earned on stockholders' equity
%
Return on common stockholders' equity
b. The profitability ratios indicate that Vidahill Inc.'s profitability has deteriorated
Because the rate of return on common stockholders'
equity exceeds
the rate earned on total assets in both years, there is positive
leverage from the use of debt.
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