Reference no: EM132908504

Problem - Solvency and profitability trend analysis - Haviland Company has provided the following comparative information:

	2012	2011	2010	2009	2008
Net income	$2,785,860	$1,857,240	$1,386,000	$924,000	$700,000
Interest expense	736,442	624,103	538,020	427,000	350,000
Income tax expense	612,786	422,611	320,160	220,800	160,000
Total assets (ending balance)	16,321,384	12,554,911	9,511,296	6,993,600	5,640,000
Total stockholders' equity (ending balance)	9,653,100	6,867,240	5,010,000	3,624,000	2,700,000
Average total assets	14,438,147	11,033,103	8,252,448	6,316,800	4,820,000
Average stockholders' equity	8,260,170	5,938,620	4,317,000	3,162,000	2,350,000

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:

	2008-2012
Rate earned on total assets	18%
Rate earned on stockholders' equity	22%
Number of times interest changes earned	3.0
Ratio of liabilities to stockholders' equity	1.5

Instructions -

1. Prepare four line graphs with the ratio on the vertical axis and the years on the horizontal axis for the following four ratios (rounded to one decimal place):

a. Rate earned on total assets

b. Rate earned on stockholders' equity

c. Number of times interest charges earned

d. Ratio of liabilities to stockholders' equity

Display both the company ratio and the industry benchmark on each graph. That is, each graph should have two lines.

2. Prepare an analysis of the graphs in (1).