Question

1. Six Measures of The ability of a company to make its periodic interest payments and repay the face amount at maturity.Solvency or The ability of a firm to generate earnings.Profitability

   The following data were taken from the financial statements of Gates Inc. for the current fiscal year.

   Property, plant, and equipment (net)						$1,146,000
   Liabilities:
   	Current liabilities			$191,000
   	Note payable, 6%, due in 15 years			955,000
   	Total liabilities					$1,146,000
   Stockholders' equity:
   	Preferred $4 stock, $100 par (no change during year)					$1,146,000
   	Common stock, $10 par (no change during year)					1,146,000
   Retained earnings:
   	Balance, beginning of year	$1,222,000
   	Net income	507,000		$1,729,000
   	Preferred dividends	$45,840
   	Common dividends	155,160		201,000
   	Balance, end of year					1,528,000
   Total stockholders' equity						$3,820,000
   Sales						$10,851,400
   Interest expense						$57,300

   Assuming that long-term investments totaled $2,483,000 throughout the year and that total assets were $4,718,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place.

   a. A solvency ratio that measures how much fixed assets a company has to support its long-term debt.Ratio of fixed assets to long-term liabilities
   b. A comprehensive leverage ratio that measures the relationship of the claims of creditors to stockholders' equity, calculated as total liabilities divided by total stockholders' equity.Ratio of liabilities to stockholders' equity
   c. Ratio that measures how effectively a business uses its assets to generate revenues, computed as sales divided by average total assets.Asset turnover
   d. A measure of the profitability of assets, without regard to the equity of creditors and stockholders in the assets.Return on total assets	%
   e. A measure of profitability computed by dividing net income by average stockholders' equity.Return on stockholders’ equity	%
   f. A measure of profitability computed by dividing net income, reduced by preferred dividend requirements, by average common stockholders' equity.Return on common stockholders' equity	%

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Answer 1

Answer is given below

please note for return on total assets closing balance of assets is taken