Six Measures of Solvency or Profitability

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

Property, plant, and equipment $($net$)$

$$3,200,000$

Liabilities:

Current liabilities

Note payable, $6\%,$ due in $15$ years

$$1,000,000$

Total liabilities

$2,000,000$

Stockholders' equity:

Preferred $$10$ stock, $$100$ par $($no change during year$)$

Common stock, $$10$ par $($no change during year$)$

$$1,000,000$

$2,000,000$

Retained earnings:

Balance, beginning of year

Net income

Preferred dividends

Common dividends

Balance, end of year

Total stockholders' equity

Sales

Interest expense

Assuming that long$-$term investments totaled $$3,000,000$ throughout the year and that total assets were $$7,000,000$ at the beginning

of the current fiscal year, determine the following. Round to one decimal place.

a$.$ Ratio of fixed assets to long$-$term liabilities

b$.$ Ratio of liabilities to stockholders' equity

c$.$ Asset turnover

d$.$ Return on total assets

e$.$ Return on stockholders' equity

X $\%$

f$.$ Return on common stockholders' equity

X $\%$

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a$.$ Divide property, plant and equipment $($net$)$ by long$-$term liabilities.

b$.$ Divide total liabilities by total stockholders'equity.

c$.$ Divide 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 $+$