Solvency and profitability trend analysis Addai Company has provided the following comparative information: Net income Interest expense Income tax expense Total assets (ending balance) Total stockholders' equity (ending balance) Average total assets Average total stockholders' equity 20Y8 20Y7 $273,406 20Y6 $367,976 $631,176 20Y5 20Y4 $884,000 $800,000 31,749 616,047 572,003 528,165 495,000 440,000 53,560 106,720 160,000 200,000 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 4,270,764 3,928,397 3,535,472 3,044,250 2,475,000 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4-20Y8 Return on total assets Return on stockholders' equity Times interest earned. 28% 18% 2.7 Ratio of liabilities to stockholders' equity 0.4 Required: 1. Determine the following for the years 2014 through 2018 for each of the graphs below. Use the amounts given above in you a. Return on total assets: eturn on Total Assets 60.0% 50.0% 40.0% 30.0% 20.0% Addal Company has provided the following comparative information: Net income Interest expense 2018 2016 2015 2014 2017 $273,406 $367,976 $631,176 $884,000 $800,000 616,047 572,003 528,165 495,000 440,000 Income tax expense Total assets (ending balance) Total stockholders' equity (ending balance) Average total assets Average total stockholders' equity 31,749 53,560 106,720 160,000 200,000 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 4,270,764 3,928,397 3,535,472 3,044,250 2,475,000 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4-20Y8 Return on total assets 28% 4 Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders' equity 0.4 Required: 1. Determine the following for the years 2014 through 2018 for each of the graphs below. Use the amounts given above in your calculations. Round to one decimal place a. Return on total assets: eturn on Total Assets 600% 50.0% 40.0% 30.0% 20.0% 1. Determine the following for the years 2014 through 2018 for each of the graphs below. Use the amounts given above in your calculations. Round to one decimal place: a. Return on total assets: Return on Total Assets 2018 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2018 2017 2017 % 2016 % 2015 96 2014 b. Return on stockholders' equity 80.0% 70.0% 2016 2015 2014 Year Company -Industry retum 20Y8 % 20Y7 % 20Y6 % 20Y5 % 2014 % b. Return on stockholders' equity: Return on Stockholders' Equity 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 20Y8 20Y7 20Y6 20Y5 20Y4 Year 2018 % 2017 % Company's return on stockholders' equity Industry return on stockholders' equity 20Y8 % 20Y7 % 20Y6 % 20Y5 % 20Y4 % c. Times interest earned: 2018 2017 2016 20Y5 Times Interest Earned Ratio 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 20Y8 20Y7 2016 20Y5 2014 Year -Company's times interest eamed Industry times interest earned 20Y8 2017 2016 2015 20Y8 % % 2017 20Y6 % % 20Y5 20Y4 % c. Times interest earned: Times Interest Earned Ratio 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 + 20Y8 20Y7 20Y6 20Y5 20Y4 Year Company's times interest earned -Industry times interest earned 0000 2018 20Y7 20Y8 20Y7 20Y6 20Y5 20Y4 d. Ratio of liabilities to stockholders' equity: 0.9 0.8 Ratio of Liabilities to Stockholders' Equity 02 20.4 0.3 0.5 0.6 0.7 0.1 0.0 20Y8 20Y7 2016 20Y5 2014 Year Company's liabilities to equity -Industry liabilities to equity 2. Refer to the selected industry ratios provided above. Both the return on total assets and the return on stockholders' equity have been moving in al years. The cause of this decline is driven by a rapid in earnings. The c positive in earnings along with high interest costs has caused the times interes negative Check My Work 4 more Check My Work uses remaining. direction in the last five years. Both measures have moved of debt relative to stockholders' equity has gradually to above the industry average in recent years. below the industry average over the last two. years. However, the 20Y8 20Y7 20Y6 20Y5 20Y4 2. Refer to the selected industry ratios provided above. Both the return on total assets and the return on stockholders' equity have been m years. The cause of this decline is driven by a rapid in earnings along with high in increase decrease in earnin ed the tim en moving in a direction in the last five years. Both measures have moved earnings. The company's level of debt relative to stockholders' equity has gradually the times interest earned ratio to the industry average in rece improved declined OVE ed the industry average over the last two over the five years. However, the 2016 20Y5 20Y4 2. Refer to the selected industry ratios provi Both the return on total assets and the return years. The cause of this decline is driven by a in earnings along with F Check My Work 4 more Check My Work uses remaining decrease increase ii industry ratios provided above. assets and the return on stockholders' equity have been moving in a s decline is driven by a rapid in earnings. The company's le in earnings along with high interest costs has caused the times interest earned ra ity have been moving in a direction in the last five years. Both measures ha the industry average in recent ye in earnings. The company's level of debt relative to stockholders' equity has gradually as caused the times interest earned ratio to fall below exceed on in the last five years. Both measures have moved e to stockholders' equity has gradually the industry average in recent years