Six Measures of Solvency or Profitability The following data were taken from the
ID: 2456037 • Letter: S
Question
Six Measures of Solvency or Profitability The following data were taken from the financial statements of Olvideo Enterprises Inc. for the current fiscal year. Property, plant, and equipment (net) $2,732,400 Liabilities: Current liabilities $237,000 Mortgage note payable, 8%, issued 2003, due 2019 1,188,000 Total liabilities $1,425,000 Stockholders' equity: Preferred $2 stock, $100 par (no change during year) $1,425,000 Common stock, $10 par (no change during year) 1,425,000 Retained earnings: Balance, beginning of year $1,520,000 Net income 592,000 $2,112,000 Preferred dividends $28,500 Common dividends 183,500 212,000 Balance, end of year 1,900,000 Total stockholders' equity $4,750,000 Net sales $14,076,000 Interest expense $95,040 Assuming that long-term investments totaled $3,088,000 throughout the year and that total assets were $5,866,000 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. Ratio of net sales to assets d. Rate earned on total assets % e. Rate earned on stockholders' equity % f. Rate earned on common stockholders' equity %
Explanation / Answer
Current liabilities 237,000 Property plant and equipment 2,732,400 note payable 1,188,000 total liabilities 1,425,000 equity 1,425,000 total equity 4,750,000 total assets 5,866,000 net income 592,000 net sales 14,076,000 interest expense 95,040 Fixed assets to long term liabilities fixed assets/long term laibilities Property plant and equipment 2,732,400 note payable 1,188,000 ratio 2.3 Laibilities to stock hokders equity total liabilities 1,425,000 total equity 4,750,000 Ratio 0.3 Net sales to assets net sales 14,076,000 total assets 5,866,000 Ratio 2.4 Rate earned to total assets net income 592,000 total assets 5,866,000 Ratio 10.1% rate earned to equity net income 592,000 total equity 4,750,000 Ratio 12.5% rate earned to common equity net income 592,000 commmon stock equity 1,425,000 Ratio 41.5%