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)						$1,430,000
Liabilities:
	Current liabilities			$143,000
	Note payable, 6%, due in 15 years			715,000
	Total liabilities					$858,000
Stockholders' equity:
	Preferred $2 stock, $100 par (no change during year)					$514,800
	Common stock, $10 par (no change during year)					514,800
Retained earnings:
	Balance, beginning of year	$550,000
	Net income	271,000		$821,000
	Preferred dividends	$10,296
	Common dividends	124,304		134,600
	Balance, end of year					686,400
Total stockholders' equity						$1,716,000
Sales						$16,562,700
Interest expense						$42,900

Assuming that total assets were $2,445,000 at the beginning of the current fiscal year, determine the following. When required, 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	%

Answer 1