Six measures of solvency or profitability The following data were taken from the financial .statements of Gates Inc. for the current fiscal year. Assuming that long-term investments totaled $3,000,000 throughout the year and that total assets were $7,000,000 at the beginning of the current fiscal year, determine the following: (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, and (F) return on common stockholders' equity. (Round ratios and percentages to one decimal place as appropriate.)

Q: Expert Answer

a) To determine Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company. Given info: Items of financial statement (a) Ratio of Fixed Assets to Long-Term Liabilities (b) Ratio of Liabilities to Stockholders’ Equity (c) Asset turnover ratio (d) Return on total assets (e) Return on stockholders’ equity (f) Return on common stockholders’ equity Explanation Ratio of Fixed Assets to Long-Term Liabilities Ratio of fixed assets to long-term liabilities = Fixed assets Long-term liabilities = $ 3 , 200 , 000 $ 2 , 000 , 000 = 1 b) To determine (b) Ratio of Liabilities to Stockholders’ Equity c) To determine (c) Asset turnover ratio d) To determine (d) Return on Total Assets e) To determine (e) Return on stockholder equity f) To determine (f) Return on common stockholder’ equity

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Answer 1

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Corporate Financial Accounting

15th Edition

Carl Warren + 1 other

Publisher: Cengage Learning

ISBN: 9781337398169

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Answer 2

BuyFind

Corporate Financial Accounting

15th Edition

Carl Warren + 1 other

Publisher: Cengage Learning

ISBN: 9781337398169

Solutions

Chapter

Section

Answer 3

Solutions

Chapter

Section

Answer 4

Chapter

Section

Answer 5

a)

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Given info: Items of financial statement

(a) Ratio of Fixed Assets to Long-Term Liabilities
(b) Ratio of Liabilities to Stockholders’ Equity
(c) Asset turnover ratio
(d) Return on total assets
(e) Return on stockholders’ equity
(f) Return on common stockholders’ equity

Explanation of Solution

Ratio of Fixed Assets to Long-Term Liabilities

Ratio of fixed assets to long-term liabilities=Fixed assets Long-term liabilities =$3,200,000$2,000,000=1

Answer 6

b)

To determine

(b) Ratio of Liabilities to Stockholders’ Equity

Answer 7

c)

To determine

(c) Asset turnover ratio

Answer 8

d)

To determine

(d) Return on Total Assets

Answer 9

e)

To determine

(e) Return on stockholder equity

Answer 10

f)

To determine

(f) Return on common stockholder’ equity

Corporate Financial Accounting

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Corporate Financial Accounting

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