Assignment
Six Measures of Liquidity or Profitability
The following data were taken from the financial statements of Whiting Enterprises Inc. for the current fiscal year. Assume that long-term investments totaled $1,000,000 for the past two years and that total assets were $14,400,000 at the beginning of the year.
|
Property, plant, and equipment (net) Liabilities:
|
|
|
$7,000,000
|
|
Current liabilities
|
|
$200,000
|
|
|
Mortgage note payable, 8%, ten-year note issued two years ago
|
|
5,000,000
|
|
|
Total liabilities
|
|
|
$ 5,200,000
|
|
Stockholders' equity:
|
|
|
|
|
Preferred S2 stock, 520 par (no change during year)
|
|
|
$ 3,000,000
|
|
Common stock, $2 par (no change during year)
|
|
|
500,000
|
|
Retained earnings:
|
|
|
|
|
Balance, beginning of year
|
$6,525,000
|
|
|
|
Net income
|
725,000
|
$7,250,000
|
|
|
Preferred dividends
|
$300,000
|
|
|
|
Common dividends
|
50,000
|
350,000
|
|
|
Balance, end of year
|
|
|
6,900,000
|
|
Total stockholders' equity
|
|
|
$10,400,000
|
|
Net sales
|
|
|
$36,400,000
|
|
Interest expense
|
|
|
$400,000
|
Determine the following: (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, and (f) rate earned on common stockholders' equity. Round to one decimal place.
|
a.
|
Ratio of fixed assets to long-term liabilities
|
1.4 |
|
b.
|
Ratio of liabilities to stockholders' equity
|
.5 |
|
c.
|
Ratio of net sales to assets
|
2.6 |
|
d.
|
Rate earned on total assets
|
7.5% |
|
e.
|
Rate earned on stockholders' equity
|
7.1% |
|
f.
|
Rate earned on common stockholders' equity
|
42.5% |