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)						$958,800
Liabilities:
	Current liabilities			$161,000
	Note payable, 6%, due in 15 years			799,000
	Total liabilities					$960,000
Stockholders' equity:
	Preferred $2 stock, $100 par (no change during year)					$720,000
	Common stock, $10 par (no change during year)					720,000
Retained earnings:
	Balance, beginning of year	$768,000
	Net income	335,000		$1,103,000
	Preferred dividends	$14,400
	Common dividends	128,600		143,000
	Balance, end of year					960,000
Total stockholders' equity						$2,400,000
Sales						$16,052,400
Interest expense						$47,940

Assuming that total assets were $3,192,000 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