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Financial Accounting
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 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)
Determine Ratio of Fixed Assets to Long-Term Liabilities.
Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.
Ratio of fixed assets to long-term liabilities is determined by dividing fixed assets and long-term liabilities.
Formula:
Calculate Ratio of Fixed Assets to Long-Term Liabilities
(b)
Determine Return on total assets.
(c)
Determine Asset turnover.
(d)
Determine return on total assets.
(e)
Determine return on stockholders’ equity.
(f)
Determine return on common stockholders’ equity.
Chapter 17 Solutions
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