Chapter 3, Problem 27P

a.

Summary Introduction

To calculate: The ratio of net income to total assets for each year of the Jolie Foster Care Homes Inc. Also, comment on the trend.

Introduction:

Ratio of net income to total assets:

It is used to compute the return on assets for a firm. It shows the efficiently with which a company uses its assets for the generation of profits.

b.

Summary Introduction

To calculate: The ratio of net income to shareholder’s equity for each year of the Jolie Foster Care Homes Inc. Comment on the trend b and determine the reason for the difference in trends between parts (a) and (b).

Introduction:

Ratio of net income to shareholder’s equity:

It is used to compute the accounting value of the shareholder’s equity for the firm. It shows how efficiently a company uses its capital to generate profits.