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nmentMain.do?invoker &takeAssignmentessionLocator-assignment-take;&inprogress-fi;). Profitability Ratios The following selected data were taken from the finandal statements of Vidahill Inc. for December 31, 207 0Y6 $5,200,000 $5,000,000 $4,800,000 2,500,000 2,500,000 0YS Total assets Notes payable (6% interest) Common stock Preferred 2.5% stock-S100 par 2,300,000 250,000 50,000 (no change during year) Retained earnings The 20Y7 net income was $411,000, and the 206 net income was $462,500. No vidends on common stock were dedared between 20Y5 and 20Y7 500,000 500,000 1.574,000 1,222,000 750,000 Preferred dividends were dedared and paid in full in 20Y6 and 20Y7 e the return on total assets, the return on stockholders\' equity, and the return on common stockholders\' equity for the years 20Y6 and 20Y? Round percentages to one decimal place Return on total assets Return on stockholders equity Return on common stockholders equity b. The proft ability ratios indicate that the company\'s profitablity has deteriorated V 20Y7 8.061 X % 19.11 % 24.2 % 20Y6 9.441 x % 26.6 % , Because the return on common stockholders\' equity exceeds V Chack My Werk Next All work saved F10 F 11 F12 BACK 8 9 0 SPACE UIP 0 1

Solution

Return on total assets = (Net income+Interest expense)/Average total assets 20Y7 11.0% =(411000+150000)/5100000 20Y6 12.5% =(462500+150000)/4900000 Workings: Interest expense = 2500000*6% = 150000 Average total assets 20Y7 = (5200000+5000000)/2 = 5100000 Average total assets 20Y6 = (5000000+4800000)/2 = 4900000