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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. 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.)

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Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFindarrow_forward

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 14, Problem 14.19EX
Textbook Problem
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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.

Chapter 14, Problem 14.19EX, Six measures of solvency or profitability The following data were taken from the financial

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.)

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

  1. (a) Ratio of Fixed Assets to Long-Term Liabilities
  2. (b) Ratio of Liabilities to Stockholders’ Equity
  3. (c) Asset turnover ratio
  4. (d) Return on total assets
  5. (e) Return on stockholders’ equity
  6. (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

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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    Chapter 14 Solutions

    Corporate Financial Accounting
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    Ch. 14 - Horizontal analysis The comparative accounts...Ch. 14 - Vertical analysis Income statement information for...Ch. 14 - Current position analysis The following items are...Ch. 14 - Accounts receivable analysis A company reports the...Ch. 14 - Inventory analysis A company reports the...Ch. 14 - Long-term solvency analysis The following...Ch. 14 - To determine: Times interest earned ratio Given...Ch. 14 - Asset turnover A company reports the following:...Ch. 14 - Return on total assets A company reports the...Ch. 14 - Common stockholders profitability analysis A...Ch. 14 - Earnings per share and price-earnings ratio A...Ch. 14 - Vertical analysis of income statement Revenue and...Ch. 14 - a Current fiscal year income from continuing...Ch. 14 - Common-sized income statement Revenue and expense...Ch. 14 - Vertical analysis of balance sheet Balance shed...Ch. 14 - a. Net income increase, 78,0% Horizontal analysis...Ch. 14 - a. (1) Current year working capital. 1,090,000...Ch. 14 - a. (1) Current years current ratio. 1,3 Current...Ch. 14 - Current position analysis The bond indenture for...Ch. 14 - Accounts receivable analysis The following data...Ch. 14 - Accounts receivable analysis Xavier Stores Company...Ch. 14 - Inventory analysis The following data were...Ch. 14 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 14 - Ratio of liabilities to stockholders' equity and...Ch. 14 - a. Hasbro, 1.7 Ratio of liabilities to...Ch. 14 - a. Mondelez International Inc., 1.4 Ratio of...Ch. 14 - a. YRC, 2.6 Asset turnover Three major segments of...Ch. 14 - Profitability ratios The following selected data...Ch. 14 - a. Year 3 return on total assets. 6.8%...Ch. 14 - Six measures of solvency or profitability The...Ch. 14 - Five measures of solvency or profitability The...Ch. 14 - Earnings per share, price-earnings ratio, dividend...Ch. 14 - a. Alphabet, 37.9 Price-earnings ratio; dividend...Ch. 14 - Earnings per share, discontinued operations The...Ch. 14 - Income statement and earnings per share for...Ch. 14 - Unusual items Explain whether Colston Company...Ch. 14 - Comprehensive Income Anson Industries, Inc....Ch. 14 - Horizontal analysis of income statement For 20V2,...Ch. 14 - Vertical analysis of income statement For 20Y2,...Ch. 14 - Effect of transactions on current position...Ch. 14 - Measures of liquidity, solvency, and profitability...Ch. 14 - Solvency and profitability trend analysis Addai...Ch. 14 - Horizontal analysis of income statement For 20Y2,...Ch. 14 - Vertical analysis of income statement For 20Y2,...Ch. 14 - Effect of transactions on current position...Ch. 14 - Measures of liquidity, solvency and profitability...Ch. 14 - Solvency and profitability trend analysis Crosby...Ch. 14 - Analyze and compare Amazon.com, Best Buy, and...Ch. 14 - Analyze and compare Alphabet, PepsiCo, and...Ch. 14 - Analyze Deere Company Deere Company (DE)...Ch. 14 - Analyze and compare Marriott and Hyatt Marriott...Ch. 14 - Ethics in Action Rodgers Industries Inc. completed...Ch. 14 - Communication The president of Freeman Industries...

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