FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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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Transcribed Image Text: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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