Question
Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $975,800 $841,200 $706,900 $604,200 $512,000 Interest expense 331,800 302,800 261,600
Addai Company has provided the following comparative information:
20Y8 | 20Y7 | 20Y6 | 20Y5 | 20Y4 | ||||||
Net income | $975,800 | $841,200 | $706,900 | $604,200 | $512,000 | |||||
Interest expense | 331,800 | 302,800 | 261,600 | 199,400 | 158,700 | |||||
Income tax expense | 312,256 | 235,536 | 197,932 | 157,092 | 122,880 | |||||
Total assets (ending balance) | 7,401,315 | 7,892,253 | 5,646,209 | 5,952,593 | 4,514,050 | |||||
Total stockholders' equity (ending balance) | 2,289,980 | 2,832,330 | 1,802,380 | 2,295,592 | 1,377,356 | |||||
Average total assets | 7,646,784 | 6,769,231 | 5,799,401 | 4,960,494 | 4,244,937 | |||||
Average stockholders' equity | 2,561,155 | 2,317,355 | 2,048,986 | 1,836,474 | 1,625,397 |
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:
20Y420Y8 | ||
Return on total assets | 16.8% | |
Return on stockholders equity | 34.9% | |
Times interest earned | 4.6 | |
Ratio of liabilities to stockholders' equity | 2.1 |
Required:
1. Determine the following for the years 20Y4 through 20Y8. Round to one decimal place:
a. Return on total assets:
20Y8 | fill in the blank |
20Y7 | fill in the blank |
20Y6 | fill in the blank |
20Y5 | fill in the blank |
20Y4 | fill in the blank |
b. Return on stockholders equity:
20Y8 | fill in the blank |
20Y7 | fill in the blank |
20Y6 | fill in the blank |
20Y5 | fill in the blank |
20Y4 | fill in the blank |
c. Times interest earned:
20Y8 | fill in the blank |
20Y7 | fill in the blank |
20Y6 | fill in the blank |
20Y5 | fill in the blank |
20Y4 | fill in the blank |
d. Ratio of liabilities to stockholders' equity:
20Y8 | fill in the blank |
20Y7 | fill in the blank |
20Y6 | fill in the blank |
20Y5 | fill in the blank |
20Y4 | fill in the blank |
2. Refer to the selected industry ratios provided above. (choose 1 option from bold below)
Both the rate earned on total assets and the rate earned on stockholders' equity have been moving in a
(positive/ negative) direction in the last five years. Both measures have moved (above/below)
the industry average over the last two years. The cause of this change is driven by a rapid (increase/decrease) in earnings.
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