The 20X5 comparative financial statements for Wilson Corp. reported the following selected information:

Required:
1. Based on the above financial data, compute the following ratios for 20X4 and 20X5:
a. Return on total assets, before tax
b. Return on total assets, after tax
c. Return on long-term capital, before tax
d. Return on long-term capital, after tax
e. Return on common shareholders’ equity
f. Operating margin
g. Asset turnover
2. As an investor in the common shares of Wilson, which ratio would you prefer as a primary measure of profitability? Why?
3. Explain any significant trends that appear to be developing.

Transcribed Image Text:

Sales revenue Net income Interest expense, long-term debt Income tax expense Long-term debt Shareholders' equity, common and preferred* Total assets Preferred share dividends Income tax rate *Preferred shares, $150,000 in all years. 20X3 $17,000,000 160,000 15,000 60,000 1,100,000 2,300,000 5,250,000 19,000 30% 20X4 $18,500,000 180,000 18,000 90,000 1,600,000 2,275,000 5,250,000 15,000 27% 20X5 $19,250,000 112,500 27,000 90,000 1,350,000 2,090,000 5,700,000 18,000 25%