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) $3,200,000 Liabilities: Current liabilities $1,000,000 Note payable, 6%, due in 15 years 2,000,000 Total liabilities $3,000,000 Stockholders’ equity: Preferred $10 stock, $100 par (no change during year) $1,000,000 Common stock, $10 par (no change during year) 2,000,000 Retained earnings: Balance, beginning of year $1,570,000 Net income 930,000 $2,500,000 Preferred dividends $100,000 Common dividends 400,000 500,000 Balance, end of year 2,000,000 Total stockholders’ equity $5,000,000 Sales $18,750,000 Interest expense $120,000 Assuming that total assets were $7,000,000 at the beginning of the current fiscal year, determine the following. Round to one decimal place. a. Ratio of fixed assets to long-term liabilities b. Ratio of liabilities to stockholders' equity c. Asset turnover d. Return on total assets % e. Return on stockholders’ equity % f. Return on common stockholders’ equit

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)				$3,200,000
Liabilities:
	Current liabilities		$1,000,000
	Note payable, 6%, due in 15 years		2,000,000
	Total liabilities				$3,000,000
Stockholders’ equity:
	Preferred $10 stock, $100 par (no change during year)				$1,000,000
	Common stock, $10 par (no change during year)				2,000,000
Retained earnings:
	Balance, beginning of year	$1,570,000
	Net income	930,000	$2,500,000
	Preferred dividends	$100,000
	Common dividends	400,000	500,000
	Balance, end of year				2,000,000
Total stockholders’ equity				$5,000,000
Sales				$18,750,000
Interest expense				$120,000

Assuming that total assets were $7,000,000 at the beginning of the current fiscal year, determine the following. Round to one decimal place.

a. Ratio of fixed assets to long-term liabilities
b. Ratio of liabilities to stockholders' equity
c. Asset turnover
d. Return on total assets	%
e. Return on stockholders’ equity	%
f. Return on common stockholders’ equit

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