Shore 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:
2004–2008
Rate earned on total assets ....... 14%
Rate earned on stockholders' equity ... 20%
Number of times interest charges earned .. 3.0
Ratio of liabilities to stockholders' equity .. 2.0

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:

2008 2007 2006 2005 2004 Net income Interest expense Income tax expense $ 42,000 70,000 140,000 210,000 210,000 142,800 133,000 119,000 112,000 105,000 63,000 12,600 21,000 42,000 63,000 Total assets (ending bac2,240,000 2,100,000 1,890,000 680,000 1400,000 Total stockholders' equity (ending balance) Average total asset:s 812,000 770,000 700,000 560,000 350,000 2,170,000 ,995,000 1,785,000 ,540,000 ,260,000 Average stockholders' equity 791,000 735,000 630,000 455,000 315,000