Six Measures of Solvency or Profitability The following data were taken from the

Question

Six Measures of Solvency or Profitability The following data were taken from the finandal statements of Olvideo Eniterprises Inc. fer the current fiscal year Property. plant, and equigment (net) $1,755,600 $185,000 924,000 Current labiities Mortgage rote pavable, g%, Issued 2003, due 2019 Total liabiles Stockholders' equity: $1,110,000 656,000 Preferred $4 stock, $100 par (no change during year) Common stock, $10 par (no change during year) Retained earnings: 710,000 260,000 970,000 $26,640 Balance, beginning of year Preferred dividends Common dividends Balance, end of year Total stockholders' eauty 55,360 82.000 $2,220,000 73,920 Assuming that long-term investments totaled $1,665,000 throughout the year and that total assets wee $3,164,000 at the begening of the current fiscal year, deterrmine the following. When required, round to one decimal place 1.9 O Retio of fixed assets to long termm iabilities b. Ratio of lHebilities to stockholders' equity d. Rate earned on total assets e. Rate earned on steckholdersequity 1. Rate earned on common steckhelders' equity 2.5# 0.10% 0.10% 1 9

Explanation / Answer

c) ratio of net sales to assets Net sales 8701000 Total Assets Total Liabilities 1110000 Stockholder equity 2220000 Total 3330000 It is equal to total assets 3330000 8701000/3330000 2.6 d) Rate earned on Total assets Net Income/Total Assets 260000/3330000*100 7.8 % e) rate earned on stockholder Equity Net Income/Stockholder Equity 260000/2220000*100 11.7 % f) Rate earned on common stockholder Equity 260000/1554000*100 16.7 % Common Stockholder Equity Common Stock 666000 Retained Earnings 888000 Common Stockholder Equity 1554000

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