Six Measures of Solvency or Profitability The following data were taken from the
ID: 2406914 • Letter: S
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) Liabilities: $1,621,400 Current liabilities Note payable, 6%, due in 15 years Total liabilities $148,000 737,000 $885,000 Stockholders' equity: Preferred $2 stock, $100 par (no change during year) $531,000 Common stock, $10 par (no change during year) 531,000 Retained earnings: $566,000 Balance, beginning of year Net income Preferred dividends Common dividends Balance, end of year 269,000 $835,000 $10,620 116,380 127,000 Total stockholders' equity Sales Interest expense 708,000 $1,770,000 $5,294,100 $44,220Explanation / Answer
a. Ratio of fixed assets to long term liabilities= Fixed Assets/Long term debt =1621400/737000 2.2 b. Ratio of liabilities to stockholder's equity= =Liabilities/Stockholder's Equity =885000/1770000 0.5 c Asset Turnover =Sales/Average total Assets =5294100/(1621400+1328000+2522000)/2 1.94 d Return on total assets =EBIT/Total Net Assets =(269000+44220)/(1621400+1328000) 11% e Return on Stockholders Equity =Net Income/Shareholder's Equity =269000/1770000 15% f Return on Common Stockholders equity =Net Income-Preferred Dividend/Average common stockholder's equity =(269000-10620)/531000 49% Note- Best effort have been made to answer the question correctly, in case of any discrepencies kindly comment and i will try to resolve it as soon as possible. Please provide positive feedback.