Question

Jodie Foster Care Homes Inc. shows the following data Total Stockholders Year Net Income Assets 20x1 S 138,000 S 2,280,000 5 959,000 20X2 20x3 20x4 Equity Total Debt 53,000 185,000 2,440,000 1,520,000 228,000 2,880,000 1,950,000 1321,000 996,000 920,000 730,000 2,110,000 1,114,000 a-1. Compute the ratio of net income to total assets for each year. (Input your answers as a percent rounded to 2 decimal places.) Year Return on 20x1 20X2 20x3 20X4 Assets a-2. What is the trend in the net income to total assets ratio? O Strong downward movement Strong upward movement b-1. Compute the ratio of net income to stockholders' equity for each year. (Input your answers as a percent rounded to 2 decimal places.) Return on Year Stockholders 20x1 20X2 20X3 20X4 b-2. What is the trend in the net income to stockholders' equity ratio? O Strong downward movement Strong upward movement

Answer 1

	Answer = 1 A)
	STEP 1: FORMULA
	Net income to total assets = Net Income / Total Assets
	STEP 2: CALCULATION OF THE RATIO
		2001	2002	2003	2004
	Net income to total assets =
	Net Income =	$          1,38,000	$        1,53,000	$               1,85,000	$       2,28,000
	Divide By	"/" By
	Total Assets	$        22,80,000	$     21,10,000	$             24,40,000	$    26,80,000
	Net income to total assets =	0.06	0.07	0.08	0.09
	Net income to total assets in %	6.05%	7.25%	7.58%	8.51%
	STEP 3: ANSWER
	Net income to total assets =
	20X1	6.05%
	20X2	7.25%
	20X3	7.58%
	20X4	8.51%
	Answer = A -2)
	Answer = Option 2 = Strong Upward Movement
	Answer = B-1)
	Return on Net income to ShareholdersEquity = Net Income / Shareholder's Equity
	CALCULATION OF THE RATIO
		2001	2002	2003	2004
	Return on Net income to ShareholdersEquity =
	Net Income =	$          1,38,000	$        1,53,000	$               1,85,000	$       2,28,000
	Divide By	"/" By
	Total Assets	$          9,59,000	$     11,14,000	$             15,20,000	$    19,50,000
	Return on Net income to ShareholdersEquity =	0.14	0.14	0.12	0.12
	Return on Net income to ShareholdersEquity % =	14.39%	13.73%	12.17%	11.69%
	STEP 3: ANSWER
	Return on Net income to ShareholdersEquity =
	20X1	14.39%
	20X2	13.73%
	20X3	12.17%
	20X4	11.69%
	Answer = B-2)
	Answer = Option 1 = Strong Downward Movement