Merlin 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:
2006–2010
Rate earned on total assets .........12%
Rate earned on stockholders' equity ......18%
Number of times interest charges earned ...2.8
Ratio of liabilities to stockholders' equity ....1.6
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 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:

2010 2009 Net income Interest expense S 129,868 280,021 20,002 174,788 299,809 419,900 S 380,000 200,000 126,000 260,001 240,075 67,234 225,000 100,800 Income tax expense Total assets (ending balance) 4,417,178 4,124,350 3,732443 3,338,500 2,750,000 Total stockholders' equity 33,617 ending balance) Average total assets Average stockholders' equity 1,904,365 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 1,839,431 1,774,497 1,599,709 1,299,900 80,000 1,687.103 1,449,804 1,089,950 690,000