Profitability Ratios

The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5:

		December 31
		20Y7		20Y6		20Y5
Total assets		$283,000		$255,000		$227,000
Notes payable (8% interest)		90,000		90,000		90,000
Common stock		36,000		36,000		36,000
Preferred 7% stock, $100 par		18,000		18,000		18,000
	(no change during year)
Retained earnings		115,640		77,480		54,000

The 20Y7 net income was $39,420, and the 20Y6 net income was $24,740. No dividends on common stock were declared between 20Y5 and 20Y7. Preferred dividends were declared and paid in full in 20Y6 and 20Y7.

a. Determine the return on total assets, the rate earned on stockholders' equity, and the return on common stockholders equity for the years 20Y6 and 20Y7. When required, round to one decimal place.

	20Y7		20Y6
Return on total assets		%		%
Return on stockholders equity		%		%
Return on common stockholders equity		%		%

b. The profitability ratios indicate that Vidahill Inc.'s profitability has improved . Since the rate of return on assets is less than the return on stockholders' equity in both years, there must be positive leverage from the use of debt Please explain and show how you got the answer. Thank you.

Profitability Ratios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 207, 2086, and 20Y5: December 31 2017 2016 2015 Total assets $283,000 $255,000 $227,000 Notes payable (8% interest) 90,000 90,000 90,000 36,000 Common stock 36,000 36,000 Preferred 7% stock, $100 par 18,000 18,000 18,000 (no change during year) Retained earnings 115,640 77,480 54,000 The 2017 net income was $39,420, and the 2016 net income was $24,740. No dividends on common stock were declared between 2025 and 2047. Preferred dividends were declared and paid in full in 2016 and 2017 a. Determine the return on total assets, the rate earned on stockholders' equity, and the return on common stockholders' equity for the years 2016 and 2047. When required, round to one decimal place. 2017 2046 Return on total assets % % Return on stockholders' equity % % Return on common stockholders' equity % % . Since the rate of return on assets is the return on stockholders' equity in both years, b. The profitability ratios indicate that Vidahill Inc.'s profitability has there must be leverage from the use of debt