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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 20Y7 20Υ6 20Y5 Total assets $210,000 $189,000 $168,000 Notes payable (8% interest) 70,000 70,000 70,000 Common stock 28,000 28,000 28,000 Preferred 6% stock, $100 par 14,000 14,000 14,000 (no change during year) Retained earnings 71,890 53,795 42,000 The 20Y7 net income was $18,935, and the 20Y6 net income was $12,635. No dividends on common stock were declared between 20Y5 and 20Y7. Preferred dividends were declared and paid in full in 20Y6 and 20Y a. 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 20Υ6 Return on total assets % % Return on stockholders' equity % Return on common stockholders' equity % b. The profitability ratios indicate that the company's profitability has Since the rate of return on total assets is the return on stockholders' equity in both years, there must be leverage from the use of debt.

The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5: December 31 20Y7 20Υ6 20Y5 Total assets $210,000 $189,000 $168,000 Notes payable (8% interest) 70,000 70,000 70,000 Common stock 28,000 28,000 28,000 Preferred 6% stock, $100 par 14,000 14,000 14,000 (no change during year) Retained earnings 71,890 53,795 42,000 The 20Y7 net income was $18,935, and the 20Y6 net income was $12,635. No dividends on common stock were declared between 20Y5 and 20Y7. Preferred dividends were declared and paid in full in 20Y6 and 20Y a. 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 20Υ6 Return on total assets % % Return on stockholders' equity % Return on common stockholders' equity % b. The profitability ratios indicate that the company's profitability has Since the rate of return on total assets is the return on stockholders' equity in both years, there must be leverage from the use of debt.

FINANCIAL ACCOUNTING
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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**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 | $210,000 | $189,000 | $168,000 | | Notes payable (8% interest) | 70,000 | 70,000 | 70,000 | | Common stock | 28,000 | 28,000 | 28,000 | | Preferred 6% stock, $100 par (no change during year) | 14,000 | 14,000 | 14,000 | | Retained earnings | 71,890 | 53,795 | 42,000 | The 20Y7 net income was $18,935, and the 20Y6 net income was $12,635. 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 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 | | % | | Return on stockholders' equity | | % | | Return on common stockholders' equity | | % | b. The profitability ratios indicate that the company’s profitability has must be ____________. Since the rate of return on total assets is ____________ the return on stockholders' equity in both years, there must be leverage from the use of debt. **Explanation:** This table presents specific financial data of Vidahill Inc. for three different years, allowing for the calculation of different profitability ratios to assess the company's performance over time. The data includes total assets, notes payable, common stock, preferred stock, and retained earnings. For 20Y7 and 20Y6, the data emphasizes determining
Transcribed Image Text:**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 | $210,000 | $189,000 | $168,000 | | Notes payable (8% interest) | 70,000 | 70,000 | 70,000 | | Common stock | 28,000 | 28,000 | 28,000 | | Preferred 6% stock, $100 par (no change during year) | 14,000 | 14,000 | 14,000 | | Retained earnings | 71,890 | 53,795 | 42,000 | The 20Y7 net income was $18,935, and the 20Y6 net income was $12,635. 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 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 | | % | | Return on stockholders' equity | | % | | Return on common stockholders' equity | | % | b. The profitability ratios indicate that the company’s profitability has must be ____________. Since the rate of return on total assets is ____________ the return on stockholders' equity in both years, there must be leverage from the use of debt. **Explanation:** This table presents specific financial data of Vidahill Inc. for three different years, allowing for the calculation of different profitability ratios to assess the company's performance over time. The data includes total assets, notes payable, common stock, preferred stock, and retained earnings. For 20Y7 and 20Y6, the data emphasizes determining
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