Chapter 15, Problem 15.17EX

Profitability ratios

The following selected data were taken from the financial statements of Robinson Inc. for December 31, 2016, 2015 and 2014:

	December31
	2016	2015	2014
Total assets.........................................	$4,800,000	$4,400,000	$4,000,000
Notes payable (8% interest)...........................	2,250,000	2,250,000	2,250,000
Common stock......................................	250,000	250,000	250,000
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 2016 net income was $372,000, and the 2015 net income was $492,000. No dividends on common stock were declared between 2014 and 2016.

1. a. Determine the rate earned on total assets, the rate earned on stockholders’ equity, and the rate earned on common Stockholders’ equity for the years 2015 and 2016. Round to one decimal place.
2. b. What conclusions can be drawn from these data as to the company’s profitability?