Question

Trend Analysis

Critelli Company has provided the following comparative information:

	Year 5		Year 4		Year 3		Year 2		Year 1
Net income	$1,052,000		$906,900		$762,100		$651,400		$552,000
Interest expense	357,700		326,500		282,000		215,000		171,100
Income tax expense	336,640		253,932		213,388		169,364		132,480
Average total assets	6,350,000		5,606,364		4,789,450		4,067,606		3,459,809
Average stockholders' equity	2,169,072		1,941,970		1,697,327		1,504,388		1,317,422

You have been asked to evaluate the historical performance of the company over the last five years.

Selected industry ratios have remained relatively steady at the following levels for the last five years:

	Industry Ratios
Return on total assets	21.9 %
Return on stockholders’ equity	45.3 %
Times interest earned	4.6

Instructions:

Calculate three ratios for Year 1 through Year 5. Round to one decimal place.

a. Return on total assets:

Year 5	%
Year 4	%
Year 3	%
Year 2	%
Year 1	%

b. Return on stockholders’ equity:

Year 5	%
Year 4	%
Year 3	%
Year 2	%
Year 1	%

c. Times interest earned:

Year 5
Year 4
Year 3
Year 2
Year 1

Answer 1