Question

The following data were taken from the financial statements of Gates Inc. for the current fiscal year. Property, plant, and equipment (net) $955,200 Liabilities: Current liabilities $158,000 Note payable, 6%, due in 15 years 796,000 Total liabilities $954,000 Stockholders' equity: $1,431,000 1,431,000 Preferred $2 stock, $100 par (no change during year) Common stock, $10 par (no change during year) Retained earnings: Balance, beginning of year Net income Preferred dividends $2,106,000 $1,526,000 580,000 $28,620 169,380 Common dividends 198,000 Balance, end of year 1,908,000 $4,770,000 Total stockholders' equity Sales $17,673,500 Interest expense $47,760

Answer 1

Requirement: a Fixed Assets to long term liabilities = Fixed Assets / Long term Liabilities Fixed Assets Long term Liabilities Fixed Assets to long term liabilities 955200 796000 1.2 Requirement: b Liabilities to stockholders Equity = Total Liabilities / Stockholders Equity Total Liabilities Stockholders Equity Liabilities to stockholders Equity 954000 4770000 0,2 Requirement: c Assets Turn over = Net sales / Average Total Assets Net Sales Average Total Assets Assets Turn over 17673500 2719000 6.5

Requirement: d Return on Total Assets = Net Income / Average Total Assets Net Income Average Total Assets Return on Total Assets 627760 5581000 11.2% Requirement: e Return on Stockholders Equity = Net Income Average Stockholders Equity Net Income Average Stockholders Equity Return on Stockholders Equity 580000 4579000 12.7% Requirement: f Return on Common stockholders Equity = (Net Income - Preference Dividend)/ Average Common stockholders Equity Net Income 580000 Preference Dividend 28620 Average Common stockholders Equity 3148000 Return on Common stockholders Equity 17.5%