Profitability RatiosThe following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5:December 31Total assetsNotes payable (8% interest)Common stockPreferred 4% stock, $100 par(no change during year)Retained earnings20Y7$228,00080,00032,00016,000Return on total assets20Y6$205,00080,00032,00016,00089,04048,000The 20Y7 net income was $30,970, and the 20Y6 net income was $11,350. No dividends on common stock were declared between 20Y5 and 20Y7. Preferreddividends were declared and paid in full in 20Y6 and 20Y7.58,71020Y7a. Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity for the years 20Y6 and 20Y7.Round percentages to one decimal place.17.2 X %20Y5$182,00080,00032,00016,00012.7 X %28.6✔ %20Y6Return on stockholders' equityReturn on common stockholders' equityb. The profitability ratios indicate that the company's profitability has improved ✓. Since the rate of return on total assets is less thanon stockholders' equity in both years, there must be positive leverage from the use of debt.62 X %11.1 X %12.5 ✔ %the return

Financial ratios include various formulas used by the company by using elements reported in the…

Profitability Ratios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5: December 31 2017 20Y6 20Y5 Total assets $228,000 $205,000 $182,000 Notes payable (8% interest) 80,000 80,000 80,000 Common stock 32,000 32,000 32,000 Preferred 4% stock, $100 par 16,000 16,000 16,000 (no change during year) Retained earnings 89,040 58,710 48,000 The 2017 net income was $30,970, and the 20Y6 net income was $11,350. No dividends on common stock were declared between 2005 and 20Y7. Preferred dividends were declared and paid in full in 2006 and 20Y7. a. Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity for the years 20Y6 and 20Y7. Round percentages to one decimal place. Return on total assets Return on stockholders' equity Return on common stockholders' equity 20Y7 20Y6 17.2 X % 62 X % 12.7 X % 11.1 X % 28.6 % 12.5 % b. The profitability ratios indicate that the company's profitability has improved ✓. Since the rate of return on total assets is less than on stockholders' equity in both years, there must be positive leverage from the use of debt. ✓ the return

Profitability Ratios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5: December 31 2017 20Y6 20Y5 Total assets $228,000 $205,000 $182,000 Notes payable (8% interest) 80,000 80,000 80,000 Common stock 32,000 32,000 32,000 Preferred 4% stock, $100 par 16,000 16,000 16,000 (no change during year) Retained earnings 89,040 58,710 48,000 The 2017 net income was $30,970, and the 20Y6 net income was $11,350. No dividends on common stock were declared between 2005 and 20Y7. Preferred dividends were declared and paid in full in 2006 and 20Y7. a. Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity for the years 20Y6 and 20Y7. Round percentages to one decimal place. Return on total assets Return on stockholders' equity Return on common stockholders' equity 20Y7 20Y6 17.2 X % 62 X % 12.7 X % 11.1 X % 28.6 % 12.5 % b. The profitability ratios indicate that the company's profitability has improved ✓. Since the rate of return on total assets is less than on stockholders' equity in both years, there must be positive leverage from the use of debt. ✓ the return

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 17E

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