Question

Current assets $745,000 $820,000

Property, plant, and equipment 1,510,000 1,400,000

Current liabilities (non-interest-bearing) 160,000 140,000

Long-term liabilities, 12% 400,000 400,000

Preferred 10% stock 250,000 250,000

Common stock, $25 par 1,200,000 1,200,000

Retained earnings, beginning of year 230,000 160,000

Net income for year 110,000 155,000

Preferred dividends declared (25,000) (25,000)

Common dividends declared (70,000) (60,000)

Round dollar values to two decimal places and other final answers to one decimal place.

a. Return on total assets %

b. Return on stockholders' equity %

c. Return on common stockholders' equity %

d. Earnings per share on common stock $

e. Price-earnings ratio on common stock

f. Dividend yield %

Answer 1

a	Return on asset		=Net Income/Average Total asset%
			=110000/2237500%
			4.916201
		Average total asset
		Current asset			745000	820000
		Property, plant and equipment			1510000	1400000
					2255000	2220000
		Average Total asset		=	(2255000+2220000)/2
				=	2237500
b	Return on stockholder's equity
		=	Net Income/Average stockholder's equity%
		=	=110000/1638000%
		=	6.715507
		Average stockholder's equity
		Retained earning Beginning			230000	160000
		Add: net Income			11000	155000
		Less : Dividends			95000	85000
		Retained earning Ending			146000	230000
		Common stock			1200000	1200000
		Preferred stock			250000	250000
		Total stockholder's equity			1596000	1680000
		Average stockholder's equity			=
				=	(1596000+1680000)/2
				=	1638000
c	Return on common stockholder's equity
		=	Net Income/Average common stockholder's equity%
		=	=(110000-25000)/1388000%
		=	6.123919
	Note : here net Income means net income after paying preferred dividends
		Average stockholder's equity
		Retained earning Beginning			230000	160000
		Add: net Income			11000	155000
		Less : Dividends			95000	85000
		Retained earning Ending			146000	230000
		Common stock			1200000	1200000
		Total stockholder's equity			1346000	1430000
		Average stockholder's equity			=
				=	(1346000+1430000)/2
				=	1388000
d	Earning per share on common stock
		=	Net Income after preferred dividends/No. of common stock outstanding
		=	=(110000-25000)/(1200000/25)
		=	1.770833
e	Price-Earnings ratio on common stock
			=
	Since the Market price per share is required and is not given in the question, hence
	It is not calculated
f	Dividend Yeilds		=
	Since the Market price per share is required and is not given in the question, hence
	It is not calculated