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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Six measures of solvency or profitability

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

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Assuming 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.

To determine

(a)

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

To determine: Ratio of Fixed Assets to Long-Term Liabilities

Explanation

Ratio of fixed assets to long-term liabilities is determined by dividing fixed assets and long-term liabilities.

Formula:

Ratio of fixed�

(b)

To determine
Return on total assets.

(c)

To determine
Asset turnover.

(d)

To determine
Return on total assets.

(e)

To determine
Return on stockholders’ equity.

(f)

To determine
Return on common stockholders’ equity.

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