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		$218,000		$196,000		$174,000
Notes payable (8% interest)		70,000		70,000		70,000
Common stock		28,000		28,000		28,000
Preferred 6% stock, $100 par		14,000		14,000		14,000
	(no change during year)
Retained earnings		79,790		54,510		42,000

The 20Y7 net income was $26,120, and the 20Y6 net income was $13,350. 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 return 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	fill in the blank 1	%	fill in the blank 2	%
Return on stockholders equity	fill in the blank 3	%	fill in the blank 4	%
Return on common stockholders equity	fill in the blank 5	%	fill in the blank 6	%

b. The profitability ratios indicate that the company's profitability has

improveddeteriorated

. Since the return on assets is

greater thanless than

the return on stockholders' equity in both years, there must be

positivenegative

leverage from the use of debt.

Answer rating: 100% (QA)

The Answer is in the image, click to view ... View the full answer