Question

Aritelli Company has provided the following comparative information:

	Year 5		Year 4		Year 3		Year 2		Year 1
Net income	$1,035,300		$892,500		$750,000		$641,000		$543,200
Interest expense	352,000		321,300		277,500		211,500		168,400
Income tax expense	331,296		249,900		210,000		166,660		130,368
Average total assets	6,901,990		6,099,497		5,215,736		4,440,104		3,785,106
Average stockholders' equity	2,347,619		2,109,929		1,851,852		1,647,815		1,448,533

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	19.8 %
Return on stockholders' equity	40.9 %
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

Return on Assets(Net Income / Average Total Assets)
Year 5 =($1,035,300 / $6,901,990)*100	15.0%
Year 4 =($892,500 / $6,099,497)*100	14.6%
Year 5 =($750,000 / $5,215,736)*100	14.4%
Year 5 =($641,000 / $4,440,104)*100	14.4%
Year 5 =($543,200 / $3,785,106)*100	14.4%
Return on Stockholder's Equiy(Net Income / Average Stockholder's Equiy)
Year 5 =($1,035,300 / $2,347,619)*100	44.1%
Year 4 =($892,500 / $2,109,929)*100	42.3%
Year 5 =($750,000 / $1,851,852)*100	40.5%
Year 5 =($641,000 / $1,647,815)*100	38.9%
Year 5 =($543,200 / $1,448,533)*100	37.5%
Times Interest earned ratio =Earning before interest & taxes / Interest expenses
Year 5 =[($1,035,300+$352,000+$331,296) / $352,000]	4.9
Year 4 =[($892,500+$321,300+$249,900) / $321,300]	4.6
Year 3 =[($750,000+$277,500+$210,000) / $277,500]	4.5
Year 2 =[($641,000+$211,500+$166,660) / $211,500]	4.8
Year 1 =[($543,200+$168,400+$130,368) / $168,400]	5.0