Computation of Financial Ratios The financial statements of the Ito Company are shown in Exhibit 12-18.

Compute the following for the 20X8 financial statements. 1. Pretax return on total assets. 2. Divide your answer to number 1 into two components: EBIT-to-sales ratio and total asset turnover. 3. After-tax rate of return on total assets. Be sure to add the after-tax interest expense to net income. 4. Rate of return on total stockholders' equity including returns to both common and preferred stockholders. Did the preferred and common stockholders benefit from the existence of debt? Explain fully. 5. Rate of return on common stockholders' equity. This ratio is the amount of net income avail- able for the common stockholders, divided by total stockholders' equity less the par value of preferred stock. Did the common stockholders benefit from the existence of preferred stock? Explain fully. 6. Calculate inventory turnover. How would Ito have been helped if they had been able to maintain. the level of inventory from 20X7?