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Six Measures of Solvency or Profitability

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

Property, plant, and equipment (net) $1,526,000
Liabilities:
Current liabilities $152,000
Mortgage note payable, 8%, issued 2003, due 2019 763,000
Total liabilities $915,000
Stockholders' equity:
Preferred $4 stock, $100 par (no change during year) $915,000
Common stock, $10 par (no change during year) 915,000
Retained earnings:
Balance, beginning of year $976,000
Net income 319,000 $1,295,000
Preferred dividends $36,600
Common dividends 38,400 75,000
Balance, end of year 1,220,000
Total stockholders' equity $3,050,000
Net sales $8,850,100
Interest expense $61,040

Assuming that long-term investments totaled $1,983,000 throughout the year and that total assets were $3,767,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place.

a. Ratio of fixed assets to long-term liabilities
b. Ratio of liabilities to stockholders' equity
c. Ratio of net sales to assets
d. Rate earned on total assets %
e. Rate earned on stockholders' equity %
f. Rate earned on common stockholders' equity %

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Beverley Smith
Beverley SmithLv2
28 Sep 2019

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Related questions

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

Property, plant, and equipment (net) $2,444,400
Liabilities:
Current liabilities $234,000
Note payable, 6%, due in 15 years 1,164,000
Total liabilities $1,398,000
Stockholders' equity:
Preferred $4 stock, $100 par (no change during year) $2,097,000
Common stock, $10 par (no change during year) 2,097,000
Retained earnings:
Balance, beginning of year $2,236,000
Net income 661,000 $2,897,000
Preferred dividends $83,880
Common dividends 17,120 101,000
Balance, end of year 2,796,000
Total stockholders' equity $6,990,000
Sales $34,349,700
Interest expense $69,840

Assuming that total assets were $7,969,000 at the beginning of the current fiscal year, determine the following. When required, 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 %
f. Return on common stockholders' equity %

Birchett Corporation's most recent balance sheet appears below:

Comparative Balance Sheet
Ending Balance Beginning Balance
Assets
Current assets:
Cash and cash equivalents $27 $26
Accounts receivable 65 59
Inventory 49 55
Total current assets 141 140
Property, plant, and equipment 533 490
Less accumulated depreciation 234 231
Net property, plant, and equipment 299 259
Total assets $440 $399
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $28 $26
Total current liabilities 28 26
Bonds payable 169 200
Total liabilities 197 226
Stockholders’ equity:
Common stock 71 70
Retained earnings 172 103
Total stockholders’ equity 243 173
Total liabilities and stockholders' equity $440 $399




The company's net income for the year was $91 and it did not sell or retire any property, plant, and equipment during the year. Cash dividends were $22. The net cash provided by (used in) operating activities for the year was:

$5

$130

$86

$96

PROBLEM 15-21 Incomplete Statements; Analysis of Ratios (L015-2, L015-3, L015-4, L015-5, LO15-6] Incomplete financial statements for Pepper Industries follow: Pepper Industries Balance Sheet March 31 - - - - Current assets: Cash.... Accounts receivable, net ... Inventory .... Total current assets Plant and equipment, net .................. Total assets .... Liabilities: Current liabilities ............. Bonds payable, 10% .............. Total liabilities .......................... Stockholders' equity: Common stock, $5 par value ...... Retained earnings Total stockholders' equity ................. Total liabilities and stockholders equity ....... $ 320,000 Pepper Industries Income Statement For the Year Ended March 31 $4,200,000 Sales ........ Cost of goods sold ...... Gross margin ........................... Selling and administrative expenses ......... Net operating income.................. Interest expense ..................... Net income before taxes ............... Income taxes (30%) ............. Net income .......... 80,000 $ ? a. b. c. The following additional information is available about the company: All sales during the year were on account. There was no change in the number of shares of common stock outstanding during the year. The interest expense on the income statement relates to the bonds payable: the amount of bonds outstanding did not change during the year. Selected balances at the beginning of the current year were: d. Accounts receivable ...... Inventory ............... Total assets ............. $270,000 $360,000 $1,800,000 e. Selected financial ratios computed from the statements above for the current year are: Earnings per share ........... Debt-to-equity ratio ........... Accounts receivable turnover .... Current ratio ................ Return on total assets ........ Times interest earned ratio ...... Acid-test ratio ............... Inventory tumover ............ $2.30 0.875 14.0 2.75 18.0% 6.75 1.25 6.5 Required: Compute the missing amounts on the company's financial statements. (Hint: What's the difference between the acid-test ratio and the current ratio?)

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