Modern Building Supply sells various building materials to retail outlets. The company has just approached Linden State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The companys financial statements for the most recent two years follow:

Modern Building Supply Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash	$	66,000	$	136,000
Marketable securities		0		17,000
Accounts receivable, net		467,000		298,000
Inventory		934,000		599,000
Prepaid expenses		18,000		25,000
Total current assets		1,485,000		1,075,000
Plant and equipment, net		1,558,022		1,435,936
Total assets	$	3,043,022	$	2,510,936
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	804,000	$	432,000
Bonds payable, 8%		618,000		618,000
Total liabilities		1,422,000		1,050,000
Stockholders' equity:
Preferred stock, $25 par, 7%		275,000		275,000
Common stock, $10 par		509,000		509,000
Retained earnings		837,022		676,936
Total stockholders' equity		1,621,022		1,460,936
Total liabilities and stockholder's equity	$	3,043,022	$	2,510,936

Modern Building Supply Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,015,000	$	4,354,000
Cost of goods sold		3,859,000		3,444,000
Gross margin		1,156,000		910,000
Selling and administrative expenses		638,000		538,000
Net operating income		518,000		372,000
Interest expense		49,440		49,440
Net income before taxes		468,560		322,560
Income taxes (40%)		187,424		129,024
Net income		281,136		193,536
Dividends paid:
Preferred dividends		19,250		19,250
Common dividends		101,800		76,350
Total dividends paid		121,050		95,600
Net income retained		160,086		97,936
Retained earnings, beginning of year		676,936		579,000
Retained earnings, end of year	$	837,022	$	676,936

During the past year, the company has expanded the number of lines that it carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30. All sales are on account.

Assume that the following ratios are typical of companies in the building supply industry:

Current ratio	2.5
Acid-test ratio	1.2
Average collection period	18	days
Average sale period	50	days
Debt-to-equity ratio	0.75
Times interest earned ratio	6.0
Return on total assets	10	%
Price-earnings ratio	9

Assume that you have just inherited several hundred shares of Modern Building Supply stock. Not being acquainted with the company, you decide to do some analytical work before making a decision about whether to retain or sell the stock you have inherited.

2.	You decide next to assess the companys rate of return. Compute the following for both this year and last year:

a.	The return on total assets. (Total assets at the beginning of last year were $2,270,000.) (Round your intermediate calculations to whole numbers and final answer to 1 decimal place.)

	This year	Last year
Return on total assets	%	%

b.	The return on common stockholders equity. (Stockholders equity at the beginning of last year was $1,259,000.)(Round your intermediate calculations to whole numbers and final answer to 1 decimal place.)

	This year	Last year
Return on common stockholders' equity	%	%