FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Solvency and Profitability Trend Analysis
Addai Company has provided the following comparative information:
20Y8 | 20Y7 | 20Y6 | 20Y5 | 20Y4 | ||||||
Net income | $273,406 | $367,976 | $631,176 | $884,000 | $800,000 | |||||
Interest expense | 616,047 | 572,003 | 528,165 | 495,000 | 440,000 | |||||
Income tax expense | 31,749 | 53,560 | 106,720 | 160,000 | 200,000 | |||||
Total assets (ending balance) | 4,417,178 | 4,124,350 | 3,732,443 | 3,338,500 | 2,750,000 | |||||
Total |
3,706,557 | 3,433,152 | 3,065,176 | 2,434,000 | 1,550,000 | |||||
Average total assets | 4,270,764 | 3,928,396 | 3,535,472 | 3,044,250 | 2,475,000 | |||||
Average total stockholders' equity | 3,569,855 | 3,249,164 | 2,749,588 | 1,992,000 | 1,150,000 |
You have been asked to evaluate the historical performance of the company over the last five years.
Selected industry ratios have remained relatively steady at the following levels for the last five years:
20Y4–20Y8 | ||
Return on total assets | 28% | |
Return on stockholders’ equity | 18% | |
Times interest earned | 2.7 | |
Ratio of liabilities to stockholders’ equity | 0.4 |
Required:
1. Determine the following for the years 20Y4 through 20Y8 for each of the graphs below. Use the amounts given above in your calculations. Round to one decimal place:
a. Return on total assets:
20Y8 | fill in the blank 1 % |
20Y7 | fill in the blank 2 % |
20Y6 | fill in the blank 3 % |
20Y5 | fill in the blank 4 % |
20Y4 | fill in the blank 5 % |
b. Return on stockholders' equity:
20Y8 | fill in the blank 6 % |
20Y7 | fill in the blank 7 % |
20Y6 | fill in the blank 8 % |
20Y5 | fill in the blank 9 % |
20Y4 | fill in the blank 10 % |
c. Times interest earned:
20Y8 | fill in the blank 11 |
20Y7 | fill in the blank 12 |
20Y6 | fill in the blank 13 |
20Y5 | fill in the blank 14 |
20Y4 | fill in the blank 15 |
d. Ratio of liabilities to stockholders' equity:
20Y8 | fill in the blank 16 |
20Y7 | fill in the blank 17 |
20Y6 | fill in the blank 18 |
20Y5 | fill in the blank 19 |
20Y4 | fill in the blank 20 |
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