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 $174,000   $157,000   $140,000   Notes payable (8% interest) 60,000   60,000   60,000   Common stock 24,000   24,000   24,000   Preferred 6% stock, $100 par 12,000   12,000   12,000     (no change during year)             Retained earnings 70,170   47,100   36,000   The 20Y7 net income was $23,790, and the 20Y6 net income was $11,820. 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. When required, round 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  . Since the return on assets is   the return on stockholders' equity in both years, there must be   leverage from the use of debt.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 20Y6 20Y5
Total assets $174,000   $157,000   $140,000  
Notes payable (8% interest) 60,000   60,000   60,000  
Common stock 24,000   24,000   24,000  
Preferred 6% stock, $100 par 12,000   12,000   12,000  
  (no change during year)            
Retained earnings 70,170   47,100   36,000  

The 20Y7 net income was $23,790, and the 20Y6 net income was $11,820. 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. When required, round 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  . 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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