Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
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,
-
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 $1,000,000 Mortgage note payable, 6%, issued 2005, due 2021 2,000,000 Total liabilities $3,000,000 Stockholders equity: Preferred $10 stock, $100 par (no change during year) $1,000,000 Common stock, $10 par (no change during year) 2,000,000 Retained earnings: Balance, beginning of year $1,570,000 Net income 930,000 $2,500,000 Preferred dividends $100,000 Common dividends 400,000 500,000 Balance, end of year 2,000,000 Total stockholders equity $5,000,000 Sales $18,900,000 Interest expense $120,000
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. Ratio of sales to assets d. Rate earned on total assets % e. Rate earned on stockholders' equity % f. Rate earned on common stockholders' equity %
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 | $1,000,000 | |||||
Mortgage note payable, 6%, issued 2005, due 2021 | 2,000,000 | |||||
Total liabilities | $3,000,000 | |||||
Stockholders equity: | ||||||
Preferred $10 stock, $100 par (no change during year) | $1,000,000 | |||||
Common stock, $10 par (no change during year) | 2,000,000 | |||||
Retained earnings: | ||||||
Balance, beginning of year | $1,570,000 | |||||
Net income | 930,000 | $2,500,000 | ||||
Preferred dividends | $100,000 | |||||
Common dividends | 400,000 | 500,000 | ||||
Balance, end of year | 2,000,000 | |||||
Total stockholders equity | $5,000,000 | |||||
Sales | $18,900,000 | |||||
Interest expense | $120,000 |
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. Ratio of sales to assets | |
d. Rate earned on total assets | % |
e. Rate earned on stockholders' equity | % |
f. Rate earned on common stockholders' equity | % |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started