The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5: December 31 20Y7 20Y6 20Y5 Total assets $159,000 $143,000 $127,000 Notes payable (8% interest) 50,000 50,000 50,000 Common stock 20,000 20,000 20,000 Preferred 3% stock, $100 par 10,000 10,000 10,000 (no change during year) Retained earnings 55,550 38,200 30,000 The 20Y7 net income was $17,650, and the 20Y6 net income was $8,500. No dividends on common stock were declared between 20Y5 and 20Y7. Preferred dividends were declared and paid in full in 20Y6 and 20Y7. a. Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders’ equity for the years 20Y6 and 20Y7. Round percentages to one decimal place. 20Y7 20Y6 Return on total assets fill in the blank 1 % fill in the blank 2 % Return on stockholders’ equity fill in the blank 3 % fill in the blank 4 % Return on common stockholders’ equity fill in the blank 5 % fill in the blank 6 % b. The profitability ratios indicate that the company's profitability has . Since the rate of return on total assets is the return on stockholders' equity in both years, there must be leverage from the use of debt.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter9: Metric-analysis Of Financial Statements

Section: Chapter Questions

Problem 9.17E: Profitability metrics The following selected data were taken from the financial statements of The...

See similar textbooks

Related questions

Question

Profitability Ratios

The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5:

	December 31
	20Y7	20Y6	20Y5
Total assets	$159,000		$143,000	$127,000
Notes payable (8% interest)	50,000		50,000	50,000
Common stock	20,000		20,000	20,000
Preferred 3% stock, $100 par	10,000		10,000	10,000
	(no change during year)
Retained earnings	55,550		38,200	30,000

The 20Y7 net income was $17,650, and the 20Y6 net income was $8,500. No dividends on common stock were declared between 20Y5 and 20Y7. Preferred dividends were declared and paid in full in 20Y6 and 20Y7.

a. Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders’ equity for the years 20Y6 and 20Y7. Round percentages to one decimal place.

	20Y7	20Y6
Return on total assets	fill in the blank 1	%	fill in the blank 2	%
Return on stockholders’ equity	fill in the blank 3	%	fill in the blank 4	%
Return on common stockholders’ equity	fill in the blank 5	%	fill in the blank 6	%

b. The profitability ratios indicate that the company's profitability has . Since the rate of return on total assets is the return on stockholders' equity in both years, there must be leverage from the use of debt.

Check My Work

Expert Solution

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions