Solvency and Profitability Trend Analysis

Crosby Company has provided the following comparative information:

	20Y8		20Y7		20Y6		20Y5		20Y4
Net income	$5,571,720		$3,714,480		$2,772,000		$1,848,000		$1,400,000
Interest expense	1,052,060		891,576		768,600		610,000		500,000
Income tax expense	1,225,572		845,222		640,320		441,600		320,000
Total assets (ending balance)	29,378,491		22,598,839		17,120,333		12,588,480		10,152,000
Total stockholders equity (ending balance)	18,706,200		13,134,480		9,420,000		6,648,000		4,800,000
Average total assets	25,988,665		19,859,586		14,854,406		11,370,240		8,676,000
Average total stockholders' equity	15,920,340		11,277,240		8,034,000		5,724,000		4,100,000

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:

	20Y420Y8
Return on total assets	19%
Return on stockholders equity	26%
Times interest earned	3.4
Ratio of liabilities to stockholders equity	1.4

Required:

1. Determine the following for the years 20Y4 through 20Y8 for each of the graphs below. Use the amounts given above in your calculations. Round to one decimal place.

a. Return on total assets:

20Y8	%
20Y7	%
20Y6	%
20Y5	%
20Y4	%

b. Return on stockholders equity:

20Y8	%
20Y7	%
20Y6	%
20Y5	%
20Y4	%

c. Times interest earned:

20Y8
20Y7
20Y6
20Y5
20Y4

d. Ratio of liabilities to stockholders' equity:

20Y8
20Y7
20Y6
20Y5
20Y4

2. Refer to the selected industry ratios provided above. Overall, these ratios indicate strong financial performance coupled with appropriate use of debt (leverage).

30.0% 25.0% 20.0% Retum on Total Assets 5.0% 0.0% 2018 2017 2046 2015 2014 Year Company's return on total assets Industry retum on total assets + 40.0% 35.0% 30.0% 25.0% Retum on Stockholders' Equity 20.0% 15.0% 10.0% 5.0% 0.0% 2048 2017 2046 20Y5 2014 Year Company's return on stockholders' equity + Industry return on stockholders' equity Times Interest Earned 20Y8 2017 2046 2045 2014 Year - Company's times interest earned +Industry times interest earned Ratio of Liabilities to Stockholders' Equity 20Y8 20Y7 2014 2046 2095 Year Company's liabilities to equity Industry liabilities to equity +