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)						$803,400
Liabilities:
	Current liabilities			$123,000
	Note payable, 6%, due in 15 years			618,000
	Total liabilities					$741,000
Stockholders' equity:
	Preferred $4 stock, $100 par (no change during year)					$741,000
	Common stock, $10 par (no change during year)					741,000
Retained earnings:
	Balance, beginning of year	$790,000
	Net income	311,000		$1,101,000
	Preferred dividends	$29,640
	Common dividends	83,360		113,000
	Balance, end of year					988,000
Total stockholders' equity						$2,470,000
Sales						$16,904,700
Interest expense						$37,080

Assuming that total assets were $3,050,000 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