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:

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 (round to one decimal place):

a. Return on total assets

b. Return on stockholders’ equity

c. Times interest 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:

20Y7 $ 367,976 572,003 53,560 20Υ8 $ 273,406 616,047 31,749 4,417,178 20Y4 20Y6 20Y5 Net income Interest expense Income tax expense Total assets (ending balance) Total stockholders' equity (ending balance) total assets Average total stockholders' equity $ 631,176 528,165 106,720 3,732,443 $ 800,000 440,000 $ 884,000 495,000 160,000 3,338,500 200,000 4,124,350 2,750,000 3,065,176 3,535,472 2,434,000 3,706,557 3,433,152 3,928,397 3,249,164 1,550,000 4,270,764 3,569,855 3,044,250 1,992,000 2,475,000 1,150,000 2,749,588 20Y4-20Y8 Return on total assets Return on stockholders' equity Times interest earned Ratio of liabilities to stockholders' equity 28% 18% 2.7 0.4