Answered: Profitability Ratios The following…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 17E

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Question

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	$250,000		$225,000	$200,000
Notes payable (8% interest)	80,000		80,000	80,000
Common stock	32,000		32,000	32,000
Preferred 7% stock, $100 par	16,000		16,000	16,000
	(no change during year)
Retained earnings	88,510		64,380	48,000

The 20Y7 net income was $25,250, and the 20Y6 net income was $17,500. 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	%