Question

Show Me How Calculator Ratios ing selected data were taken from the financial statements of Vidahill Inc. for December 31, 2017, 2076, and 2015: December 31 2017 2016 2015 $250,000 $225,000 $200,000 s payable (8% interest) 80,000 80,000 80,000 Common stock 32,000 32,000 32,000 Preferred 3% stock, $100 par 16,000 16,000 16,000 Ino change during year) ned earnings 101,415 67,145 48,000 The 2017 net income was $34,750, and the 2016 net income was $19,625. No dividends on common stock were declared between 2015 and 2017. Preferred and in full in 2016 and 2017. Determine the return on total assets, the rate earned on stockholders' equity, and the return on common stockholders' equity for the years 2016 and one decimal place. 2017 2016 Return on stockholders' equity Return on common stockholders' equity Since the rate of return on assets is b. The profitability ratios indicate that Vidahill Inc.'s profitability has both years, there must be leverage from the use of debt. My Work more Check My Work uses remaining Address

Answer 1

Computation of Return n Total Asset
Year	20Y7	20Y6
Net Income (a)	$34,750.00	$19,625.00
Average Assets ( CY Asset+ PY Asset)/2) (b)	237500	212500
Interest ($80000 x 8%) ( C)	$6,400.00	$6,400.00
EBIT (d= a+c)	$41,150.00	$26,025.00
Return on Total Asset (d/b)	17.33%	12.25%
* Return on total assets = EBIT/ Average Total Assets
Computation of Return Stockholder Equity
Year	20Y7	20Y6	20Y5
Net Income (a)	$34,750.00	$19,625.00
Shareholder Equity( Share Capital + Retained Earnings + preferred capital)	149415	$110,145.00	96000
Average Shareholder equity (Current year + Previous Year)/2) (b)	$129,780.00	$103,072.50
Return on stockholders’ equity =(Net Income/ Average shareholder equity)   (a/b)	26.78%	19.04%
Computation of Return on Common Stockholder Equity
Year	20Y7	20Y6	20Y5
Net Income (a)	$34,750.00	$19,625.00
Preferred Dividend (16,000 x 3%)	$480.00	$480.00	$480.00
Common stockholder equity ( Common stock + Retained Earning)	$133,415.00	$94,145.00	$80,000.00
Average Common Shareholder equity (Current year + Previous Year)/2) (b)	$113,780.00	$87,072.50
Return on common stockholders’ equity (NI - Preferred Dividend/Av. common stock holders equity) (a/b)	30.54%	22.54%

The Profitability ration indicate that the co.'s Profitablity has Deterioated. Because the rate of Return on Common Stockholder's Equity Exceeds the return on total asset in both year there is positive leverage from the use of debt.