Reference no: EM132379007

Question: Six Measures of Solvency or Profitability

The following data were taken from the financial statements of Gates Inc. for the current fiscal year.

Property, plant, and equipment (net) $3,200,000

Liabilities:

Current liabilities $1,000,000

Note payable, 6%, due in 15 years 2,000,000

Total liabilities $3,000,000

Stockholders' equity:

Preferred $10 stock, $100 par (no change during year) $1,000,000

Common stock, $10 par (no change during year) 2,000,000

Retained earnings:

Balance, beginning of year $1,570,000

Net income 930,000 $2,500,000

Preferred dividends $100,000

Common dividends 400,000 500,000

Balance, end of year 2,000,000

Total stockholders' equity $5,000,000

Sales $18,900,000

Interest expense $120,000

Assuming that long-term investments totaled $3,000,000 throughout the year and that total assets were $7,000,000 at the beginning of the current fiscal year, determine the following. Round to one decimal place.

a. Ratio of fixed assets to long-term liabilities

b. Ratio of liabilities to stockholders' equity

c. Asset turnover

d. Return on total assets %

e. Return on stockholders' equity %

f. Return on common stockholders' equity%