Question

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)						$1,729,200
Liabilities:
	Current liabilities			$156,000
	Note payable, 6%, due in 15 years			786,000
	Total liabilities					$942,000
Stockholders' equity:
	Preferred $4 stock, $100 par (no change during year)					$706,500
	Common stock, $10 par (no change during year)					706,500
Retained earnings:
	Balance, beginning of year	$754,000
	Net income	267,000		$1,021,000
	Preferred dividends	$28,260
	Common dividends	50,740		79,000
	Balance, end of year					942,000
Total stockholders' equity						$2,355,000
Sales						$16,715,400
Interest expense						$47,160

Assuming that total assets were $3,132,000 at the beginning of the current fiscal year, determine the following. When required, 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' equity	%

Answer 1

The question deals with ratio analysis and the answers are written down including steps.
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