FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Six Measures of Solvency or Profitability
The following data were taken from the financial statements of Loveseth Inc. for the current fiscal year.
Property, plant, and equipment (net) | $3,040,000 | |||||
Liabilities: | ||||||
Current liabilities | $1,200,000 | |||||
Note payable, 6%, due in 15 years | 1,600,000 | |||||
Total liabilities | $2,800,000 | |||||
Stockholders’ equity: | ||||||
$800,000 | ||||||
Common stock, $10 par (no change during year) | 1,600,000 | |||||
Balance, beginning of year | $1,072,000 | |||||
Net income | 928,000 | $2,000,000 | ||||
Preferred dividends | $80,000 | |||||
Common dividends | 320,000 | 400,000 | ||||
Balance, end of year | 1,600,000 | |||||
Total stockholders’ equity | $4,000,000 | |||||
Sales | $17,920,000 | |||||
Interest expense | $96,000 |
Assuming that total assets were $6,000,000 at the beginning of the current fiscal year, determine the following: Round your answers to one decimal place.
a. Ratio of fixed assets to long-term liabilities | fill in the blank 1 |
b. Ratio of liabilities to |
fill in the blank 2 |
c. Asset turnover | fill in the blank 3 |
d. Return on total assets | fill in the blank 4% |
e. Return on stockholders’ equity | fill in the blank 5% |
f. Return on common stockholders’ equity | fill in the blank 6% |
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Step 1 Introduction
VIEW Step 2 a) Computation of Fixed assets to long term liabilities ratio
VIEW Step 3 b) Computation of Liabilities to Stockholder equity ratio
VIEW Step 4 c) Computation of Assets turnover ratio
VIEW Step 5 d) Computation of Return on total assets
VIEW Step 6 e) Computation of Return on shareholder equity
VIEW Step 7 f) Computation of Return on Common stockholder equity
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