Profitability Measures

Match each computation to one of the profitability measures in the table.

Profitability Measures Computations

Asset turnover: $8,260,000/[5,783,000+5,593,000)/2]$

Return on total assets: $(791,340+127,000)/[6,607,000+6,417,000)/2]$

Return on stockholders equity: $791,340/[4,077,000+3,873,150)/2]$

Return on common stockholders equity: $(791,340-65,000)/[3,589,500+3,445,920)/2]$

Earnings per share on common stock $(791,340-65,000)/250,000$ shares

Price$-$earnings ratio: $35/3\mathrm{.}05$

Dividends per share: $175,000/250,000$ shares

Dividend yield: $\mathrm{.}70/\mathrm{.}35$

Feedback Area

Feedback

Look for patterns in the computations and match them to ratios that are related to each other. Identify the amounts in the computations and consider how they are related to

Question Content Area

Comparative Income Statement

Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Measures part and on the Profitability Measures part. Compute any missing amounts and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only at the figure to the right of one decimal place. If $<5,$ round down and if $>=5,$ round up$.$ For example, for $32\mathrm{.}048\%$ enter $32\mathrm{.}0\%.$ For $32\mathrm{.}058\%$ enter $32\mathrm{.}1\%.$

Comparative Income Statement

For the Years Ended December $31,20$Y$6$ and $20$Y$5$

Increase$/($Decrease$)$

$20$Y$620$Y$5$ Amount Percentage

Sales $=$ $$7,267,000$

Cost of good$=$ $$3,823,000$

Selling expenses$=(1,452,300)$

Administrative expenses $(1,239,000)(1,103,000)$

Total operating expenses $$(2,556,200)$

Operating income $$1,266,800$

Other expense $($interest$)(120,600)$

Income before income tax expense $$1,146,200$