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)						$1,567,500
Liabilities:
	Current liabilities			$209,000
	Note payable, 6%, due in 15 years			1,045,000
	Total liabilities					$1,254,000
Stockholders' equity:
	Preferred $2 stock, $100 par (no change during year)					$940,500
	Common stock, $10 par (no change during year)					940,500
Retained earnings:
	Balance, beginning of year	$1,004,000
	Net income	397,000		$1,401,000
	Preferred dividends	$18,810
	Common dividends	128,190		147,000
	Balance, end of year					1,254,000
Total stockholders' equity						$3,135,000
Sales						$19,257,750
Interest expense						$62,700

Assuming that total assets were $4,170,000 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