Ch. 17-3 (Six Measures of Solvency or Profitability)

The following data were taken from the financial statements of Olvideo Enterprises Inc. for the current fiscal year.

Property, plant, and equipment (net)						$1,716,000
Liabilities:
	Current liabilities			$156,000
	Mortgage note payable, 8%, issued 2003, due 2019			780,000
	Total liabilities					$936,000
Stockholders' equity:
	Preferred $4 stock, $100 par (no change during year)					$468,000
	Common stock, $10 par (no change during year)					468,000
Retained earnings:
	Balance, beginning of year	$500,000
	Net income	222,000		$722,000
	Preferred dividends	$18,720
	Common dividends	79,280		98,000
	Balance, end of year					624,000
Total stockholders' equity						$1,560,000
Net sales						$5,571,850
Interest expense						$62,400

Assuming that long-term investments totaled $1,248,000 throughout the year and that total assets were $2,371,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place.

a. Ratio of fixed assets to long-term liabilities b. Ratio of liabilities to stockholders' equity c. Ratio of net sales to assets d. Rate earned on total assets e. Rate earned on stockholders' equity f. Rate earned on common stockholders' equity 2.2 0.6 2.3 9.1 *96 14.2 % 18.6 % Partially Correct Check My Work Feedback a. Divide property, plant and equipment (net) by long-term liabilities b. Divide total liabilities by total stockholders'equity C. Divide net sales by average total assets, excluding long-term investments. Average total assets (Beginning total assets + Ending total assets) 2 To find ending total assets, use the accounting equation and substitute ending liabilities stockholders'equity for the amount. d. Divide the sum of net income plus interest expense by average total assets. Average total assets - (Beginning total assets + Ending total assets) 2 To find ending total assets, use the accounting equation and substitute ending liabilities stockholders'equity for the amount. e. Divide net income by average total stockholders'equity. Average total stockholders'equity-(Beginning total stockholders'equity + Ending total stockholders'equity) 2. f. Divide net income minus preferred dividends by average common stockholders'equity. Common stockholders'equity = Common stock + Retained earnings. Average common stockholders'equity = (Beginning common stockholders'equity Ending common stockholders'equity) 2. Learning Objective 2, Learning Objective 3