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 stockholders’ equity (ending balance) 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:

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Chapter1: Financial Statements And Business Decisions
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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 stockholders’ equity (ending balance) 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
a. Return on total assets:
Return on Total Assets
20Y8
20Y7
20Y6
20Y5
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
20Y8
6.4 X %
9.3 X %
17.8 X %
29.1 X %
20Y7
20Y6
20Y5
Year
-Company's return on total assets
Industry return on total assets
20Y4
Transcribed Image Text:a. Return on total assets: Return on Total Assets 20Y8 20Y7 20Y6 20Y5 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 20Y8 6.4 X % 9.3 X % 17.8 X % 29.1 X % 20Y7 20Y6 20Y5 Year -Company's return on total assets Industry return on total assets 20Y4
b. Return on stockholders' equity:
Return on Stockholders' Equity
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
20Y8
20Y7
20Y6
Year
- Company's return on stockholders' equity
- Industry return on stockholders' equity
20Y5
20Y4
Transcribed Image Text:b. Return on stockholders' equity: Return on Stockholders' Equity 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 20Y8 20Y7 20Y6 Year - Company's return on stockholders' equity - Industry return on stockholders' equity 20Y5 20Y4
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