Six measures of solvency or profitability OBJ. 2, 3 The following data were taken from the financial statements of Gates Inc. for the current fiscal year. Assuming that long-term investments totaled $3,000,000 throughout the year and that total assets were $7,000,000 at the beginning of the current fiscal year, determine the following:

(a) ratio of fixed assets to long-term liabilities,

(b) ratio of liabilities to stockholders’ equity,

(c) ratio of sales to assets,

(d) rate earned on total assets,

(e) rate earned on stockholders’ equity, and

(f) rate earned on common stockholders’ equity.

Round to one decimal place.

Property, plant, and equipment (net) . . . . . . . . . . . . . . . . . . . . . . $ 3,200,000 Liabilities:

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000 Mortgage note payable, 6%, issued 2005, due 2021 . . . . . . 2,000,000 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,000,000 Stockholders’ equity:

Preferred $10 stock, $100 par (no change during year) . . . $ 1,000,000 Common stock, $10 par (no change during year) . . . . . . . . 2,000,000 Retained earnings:

Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,570,000 Net income ........................................... 930,000 $2,500,000 Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,000 Common dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 500,000 Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000,000 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,900,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,000