Determine the return on common stockholders equity

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Reference no: EM132719560

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

 

20Y7

20Y6

20Y5

Total assets

$4,800,000

$4,400,000

$4,000,000

Notes payable (8% interest)

2,250,000

2,250,000

2,250,000

Common stock

250,000

250,000

250,000

Preferred 4% stock, $100 par (no change during year)

500,000

500,000

500,000

Retained earnings

1,574,000

1,222,000

750,000

The 20Y7 net income was $372,000, and the 20Y6 net income was $492,000. No dividends on common stock were declared between 20Y5 and 20Y7. Preferred dividends were declared and paid in full in 20Y6 and 20Y7.

Required -

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.

b. What conclusions can be drawn from these data as to the company's profitability?

Reference no: EM132719560

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