The following financial information is for the A. Galler Company for 2001, 2000, and 1999:

2001 2000 1999 Income before interest $4,400,000 $4,000,000 $3,300,000 Interest expense 800,000 600,000 550,000 Income before tax 3,600,000 3,400,000 2,750,000 Tax 1,500,000 1,450,000 1,050,000 Net income $2,100,000 $1,950,000 $1,700,000 2001 2000 1999 Current liabilities $2,600,000 $2,300,000 $2,200,000 Long-term debt 7,000,000 6,200,000 5,800,000 Preferred stock (14%) 100,000 100,000 100,000 Common equity 10,000,000 9,000,000 8,300,000 Required

a. For 2001, 2000, and 1999, determine the following:

1. Return on assets (using end-of-year total assets)

2. Return on investment (using end-of-year long-term liabilities and equity)

3. Return on total equity (using ending total equity)

4. Return on common equity (using ending common equity)

b. Discuss the trend in these profit figures.

c. Discuss the benefit from the use of long-term debt and preferred stock.