chapter 13 ex 8

chapter 13 ex 8 - b = 5 d Return on common stockholders’...

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1. Ratios: a. Return on sales = (Net income + Interest expense, net of tax)/Net sales [($60,000 + ($50,000 × 60%)]/$650,000 = $90,000/$650,000 = 13.85 % b. Asset turnover = Net sales/Average total assets $650,000/[($1,600,000 + $2,000,000*)/2] = $650,000/$1,800,000 = 0.36 times *Total assets at end of year are the same as total liabilities and stockholders’ equity (given). c. Return on assets = (Net income + Interest expense, net of tax)/Average total assets $90,000 (from Part a. )/$1,800,000 (from Part
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Unformatted text preview: b. ) = 5 % d. Return on common stockholders’ equity = (Net income – Preferred dividends)/ Average common stockholders’ equity ($60,000 – $25,000*)/[($950,000 + $915,000**)/2] = $35,000/$932,500 = 3.75 % *Preferred dividends: $250,000 par value × 10% **Stockholders’ equity at beginning of year: Common stock $600,000 Retained earnings $350,000 at end of year less $60,000 net income plus $25,000 dividends 315,000 Stockholders’ equity at beginning of year $915,000...
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This note was uploaded on 04/13/2008 for the course ACCT 201 taught by Professor Scconline during the Summer '07 term at UNL.

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