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

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Six Measures of Solvency or Profitability

The following data were taken from the financial statements of Gates Inc. for the current fiscal year.

Assuming that total assets were $7,000,000 at the beginning of the current fiscal year, determine the following. Round to one decimal place.

Property, plant, and equipment (net) $3,200,000 Liabilities: Current liabilities $1,000,000 Note payable, 6%, due in 15 years 2,000,000 Total liabilities $3,000,000 Stockholders’ equity: Preferred $10 stock, $100 par (no change during year) $1,000,000 Common stock, $10 par (no change during year) 2,000,000 Retained earnings: Balance, beginning of year $1,570,000 Net income 930,000 $2,500,000 Preferred dividends $100,000 Common dividends 400,000 500,000 Balance, end of year 2,000,000 Total stockholders’ equity $5,000,000 Sales $18,750,000 Interest expense $120,000

Explanation / Answer

Asset turnover = Sales revenue/ Average assets =18750000/(8000000+7000000)/2= 2.5

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