Question

1. 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)						$2,392,000
   Liabilities:
   	Current liabilities			$238,000
   	Note payable, 6%, due in 15 years			1,196,000
   	Total liabilities					$1,434,000
   Stockholders' equity:
   	Preferred $2 stock, $100 par (no change during year)					$1,434,000
   	Common stock, $10 par (no change during year)					1,434,000
   Retained earnings:
   	Balance, beginning of year	$1,530,000
   	Net income	645,000		$2,175,000
   	Preferred dividends	$28,680
   	Common dividends	234,320		263,000
   	Balance, end of year					1,912,000
   Total stockholders' equity						$4,780,000
   Sales						$30,292,500
   Interest expense						$71,760

   Assuming that total assets were $5,903,000 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	%

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Answer 1