Addai Company has provided the following comparative information

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:
2012-2016
Rate earned on total assets..........................28%
Rate earned on stockholders' equity...............18%
Number of times interest charges are earned.......2.7
Ratio of liabilities to stockholders' equity..........0.4
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 are 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).

Transcribed Image Text:

2014 273,406 367,976 631,176 884,000 800,000 528,165 106,720 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 2016 2015 2013 2012 Net income Interest expense Income tax expense Total assets (ending balance) Total stockholders' equity 616,047 572,003 53,560 495,000 160,000 440,000 200,000 31,749 (ending balance) Average total assets Average total stockholders' equity 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000