Six Measures of Solvency or ProfitabilityThe following data were taken from the financial statements of Gates Inc. for the current fiscal year.Property, plant, and equipment (net) $1,361,800Liabilities: Current liabilities $125,000 Note payable, 6%, due in 15 years 619,000 Total liabilities $744,000Stockholders' equity: Preferred $4 stock, $100 par (no change during year) $446,400 Common stock, $10 par (no change during year) 446,400Retained earnings: Balance, beginning of year$476,000 Net income204,000 $680,000 Preferred dividends$17,856 Common dividends66,944 84,800 Balance, end of year 595,200Total stockholders' equity $1,488,000Sales $6,678,000Interest expense $37,140Assuming that long-term investments totaled $1,116,000 throughout the year and that total assets were $2,120,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place.a. Ratio of fixed assets to long-term liabilitiesfill in the blank 1b. Ratio of liabilities to stockholders' equityfill in the blank 2c. Asset turnoverfill in the blank 3d. Return on total assetsfill in the blank 4 %e. Return on stockholders’ equityfill in the blank 5 %f. Return on common stockholders' equity

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Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter17: Financial Statement Analysis

Section: Chapter Questions

Problem 20E: Five measures of solvency or profitability The balance sheet for Garcon Inc. at the end of the...

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Six Measures of Solvency or Profitability

The following data were taken from the financial statements of Gates Inc. for the current fiscal year.

Property, plant, and equipment (net)				$1,361,800
Liabilities:
	Current liabilities		$125,000
	Note payable, 6%, due in 15 years		619,000
	Total liabilities				$744,000
Stockholders' equity:
	Preferred $4 stock, $100 par (no change during year)				$446,400
	Common stock, $10 par (no change during year)				446,400
Retained earnings:
	Balance, beginning of year	$476,000
	Net income	204,000	$680,000
	Preferred dividends	$17,856
	Common dividends	66,944	84,800
	Balance, end of year				595,200
Total stockholders' equity				$1,488,000
Sales				$6,678,000
Interest expense				$37,140

Assuming that long-term investments totaled $1,116,000 throughout the year and that total assets were $2,120,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place.

a. Ratio of fixed assets to long-term liabilities	fill in the blank 1
b. Ratio of liabilities to stockholders' equity	fill in the blank 2
c. Asset turnover	fill in the blank 3
d. Return on total assets	fill in the blank 4 %
e. Return on stockholders’ equity	fill in the blank 5 %
f. Return on common stockholders' equity

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