ebook E Print Item Solvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Y8 2017 2016 2015 2014 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 4,124,350 3,338,500 2,750,000 Total assets (ending balance) Total stockholders' equity (ending balance) 4,417,178 3,706,557 4,270,764 3,732,443 3,065,176 2,434,000 1,550,000 3,433,152 3,928,396 3,044,250 2,475,000 Average total assets Average total stockholders' equity 3,535,472 2,749,588 3,569,855 3,249,164 1,992,000 1,150,000 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: 2014-20Y8 Return on total assets 28% Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders' equity 0.4 Required: Check My Work Previous Next > Email Instructor Save and Exit Submit Assignment for Grading eBook E Print Item Required: 1. Determine the following for the years 20Y4 through 2048 for each of the graphs below. Use the amounts given above in your calculations. Round to one decimal place: a. Return on total assets: 60.0% 50.0% 40.0% Return on Total Assets 30.0% 20.0% 10.0% 0.0% 20Y8 20Y7 20Y6 2015 2014 Year Company's return on total assets Industry return on total assets Check My Work Previous Next Email Instructor Save and Exit Submit Assignment for Grading eBook Print Item 20Y8 % 2017 % 2016 % 20Y5 % 2014 % b. Return on stockholders' equity: 80.0% Chapter 14 Homework assignment 70.0% 60.0% 50.0% Return on Stockholders' Equity 40.0% 30.0% 20.0% 10.0% Check My Work Previous Next Email Instructor Save and Exit Submit Assignment for Grading eBook Print Item Return 20.0% 10.0% 0.0% 20Y8 2017 20Y6 2045 2014 Year Company's retum on stockholders' equity Industry return on stockholders' equity 20Y8 % 2047 % 2016 % 2015 % 2014 % c. Times interest earned: 3.5 3.0 Check My Work Previous Next Email Instructor Save and Exit Submit Assignment for Grading eBook Print Item 3.0 2.5 2.0 Times Interest Earned Ratio 1.5 1.0 0.5 0.0 20Y8 2017 2046 20Y5 2014 Year Company's times interest eamed Industry times interest earned 20Y8 2017 ml 2046 20Y5 Check My Work Previous Next Email Instructor Save and Exit Submit Assignment for Grading eBook E Print Item 2016 2015 2014 d. Ratio of liabilities to stockholders' equity: 0.9 0.8 0.7 0.6 0.5 Ratio of Liabilities to Stockholders' Equity 9 0.4 0.3 0.2 0.1 0.0 20Y8 2017 2046 2045 2014 Year Check My Work Previous Next > Email Instructor Save and Exit Submit Assignment for Grading eBook Print Item Ratio of Lial 0.2 0.1 0.0 20Y8 2017 2016 2045 2014 Year Company's liabilities to equity Industry liabilities to equity 20Y8 2017 2016 20Y5 2014 2. Refer to the selected industry ratios provided above. Both the return on total assets and the return on stockholders' equity have been moving in a direction in the last five years. Both measures have moved the industry average over the last two years. The cause of this decline is driven by a rapid in earnings. The company's level of debt relative to stockholders' equity has gradually over the five years. However, the in earnings along with high interest costs has caused the times interest earned ratio to the industry average in recent years. Check My Work Previous Next > Email Instructor Save and Exit Submit Assignment for Grading
