Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter 1, Problem 3AA
1)
To determine
Calculate the return on assets for Company S in the current year and prior year.
2)
To determine
To explain the trend shown by Company S as favourable or unfavourable based on the return on assets.
3)
To determine
Identify whether the return on assets of Company S in the current year is better or worse when it is compared with Company A and Company G.
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Solvency and Profitability Trend Analysis
Addai Company has provided the following comparative information:
20Y8
20Y7
20Y6
20Y5
20Y4
Net income
$273,406
$367,976
$631,176
$884,000
$800,000
Interest expense
616,047
572,003
528,165
495,000
440,000
Income tax expense
31,749
53,560
106,720
160,000
200,000
Total assets (ending balance)
4,417,178
4,124,350
3,732,443
3,338,500
2,750,000
Total stockholders’ equity (ending balance)
3,706,557
3,433,152
3,065,176
2,434,000
1,550,000
Average total assets
4,270,764
3,928,396
3,535,472
3,044,250
2,475,000
Average total stockholders' equity
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%…
Solvency and Profitability Trend Analysis
Addai Company has provided the following comparative information:
20Y8
20Y7
20Y6
20Y5
20Y4
Net income
$273,406
$367,976
$631,176
$884,000
$800,000
Interest expense
616,047
572,003
528,165
495,000
440,000
Income tax expense
31,749
53,560
106,720
160,000
200,000
Total assets (ending balance)
4,417,178
4,124,350
3,732,443
3,338,500
2,750,000
Total stockholders’ equity (ending balance)
3,706,557
3,433,152
3,065,176
2,434,000
1,550,000
Average total assets
4,270,764
3,928,396
3,535,472
3,044,250
2,475,000
Average total stockholders' equity
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%…
Solvency and Profitability Trend Analysis
Addai Company has provided the following comparative information:
20Y8
20Y7
20Y6
20Y5
20Y4
Net income
$273,406
$367,976
$631,176
$884,000
$800,000
Interest expense
616,047
572,003
528,165
495,000
440,000
Income tax expense
31,749
53,560
106,720
160,000
200,000
Total assets (ending balance)
4,417,178
4,124,350
3,732,443
3,338,500
2,750,000
Total stockholders’ equity (ending balance)
3,706,557
3,433,152
3,065,176
2,434,000
1,550,000
Average total assets
4,270,764
3,928,396
3,535,472
3,044,250
2,475,000
Average total stockholders' equity
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%…
Chapter 1 Solutions
Principles of Financial Accounting.
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