Solvency and Profitability Trend Analysis (Graph Picture from A-D is on the buttom for references) 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: 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 % 20Y7 fill in the blank % 20Y6 fill in the blank % 20Y5 fill in the blank % 20Y4 fill in the blank % 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 20Y7 fill in the blank 20Y6 fill in the blank 20Y5 fill in the blank 20Y4 fill in the blank d. Ratio of liabilities to stockholders' equity: 20Y8 fill in the blank 20Y7 fill in the blank 20Y6 fill in the blank 20Y5 fill in the blank 20Y4 fill in the blank

Solvency and Profitability Trend Analysis (Graph Picture from A-D is on the buttom for references) 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: 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 % 20Y7 fill in the blank % 20Y6 fill in the blank % 20Y5 fill in the blank % 20Y4 fill in the blank % 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 20Y7 fill in the blank 20Y6 fill in the blank 20Y5 fill in the blank 20Y4 fill in the blank d. Ratio of liabilities to stockholders' equity: 20Y8 fill in the blank 20Y7 fill in the blank 20Y6 fill in the blank 20Y5 fill in the blank 20Y4 fill in the blank

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Solvency and Profitability Trend Analysis

(Graph Picture from A-D is on the buttom for references)

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:

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 %
20Y7	fill in the blank %
20Y6	fill in the blank %
20Y5	fill in the blank %
20Y4	fill in the blank %

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
20Y7	fill in the blank
20Y6	fill in the blank
20Y5	fill in the blank
20Y4	fill in the blank

d. Ratio of liabilities to stockholders' equity:

20Y8	fill in the blank
20Y7	fill in the blank
20Y6	fill in the blank
20Y5	fill in the blank
20Y4	fill in the blank

See picture A for reference
60.0%
50.0%
70.0%
See picture B for reference
40.0%
60.0%
30.0%
50.0%
20.0%
40.0%
10.0%
30.0%
0.0%
20.0%
20Υ8
20Y7
20Y6
20Y5
20Y4
Year
10.0%
+Company's retum on total assets
Industry retum on total assets
0.0%
20Υ8
20Y7
20Y6
20Y5
20Υ4
Year
Company's retum on stockholders equity
Industry retum on stockholders equity
See C picture for reference
3.5
3.0
0.9
0.8
2.5
0.7
2.0
0.6
1.5
0.5
0.4
1.0
0.3
0.5
0.2
0.0
0.1
20Υ8
20Υ7
20Υ6
20Y5
20Υ4
Year
0.0
20Υ8
20Y7
20Y6
20Y5
20Υ4
Company's times interest eamed
Industry times interest earned
Year
Company's labilities to equity
See D picture for reference
-Industry liabties to equity
Times Interest Earned Ratio
Return on Total Assets
Return on Stockholders Equity
Ratio of Liabilities to Stockholders' Equity

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