Merlin Company has provided the following comparative information:

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:

Instructions
1. Prepare four line graphs with the ratio on the vertical axis and the years on the horizontal axis for the following four ratios (rounded to one decimal place):
a. Rate earned on total assets
b. Rate earned on stockholders' equity
c. Number of times interest charges earned
d. Ratio of liabilities to stockholders' equity
Display both the company ratio and the industry benchmark on each graph. That is, each graph should have two lines.
2. Prepare an analysis of the graphs in(1).

Transcribed Image Text:

2010 2006 2009 2008 2007 $ 380,000 $ 129,868 280,021 20,002 4,417,178 $ 174,788 260,001 33,617 4,124,350 $ 299,809 240,075 67,234 3,732,443 $ 419,900 Net income Interest expense Income tax expense Total assets (ending balance) Total stockholders' equity (ending balance) Average total assets Average stockholders' equity 225,000 100,800 3,338,500 126,000 2,750,000 1,774,497 3,928,396 1,599,709 3,535,472 1,299,900 3,044,250 1,089,950 1,904,365 4,270, 764 2,475,000 1,839,431 1,687,103 1,449,804 690,000