Valencia Company had the following income statements for 20X1 and 20X2:

Valencia Company generally paid dividends approximately equal to its net income. This resulted in the company’s stockholders’ equity totaling $1,480 at the end of both 20X0 and 20X1. However, at the end of 20X2 the company’s total stockholders’ equity was $2,080 primarily because of a large issuance of common stock in mid-20X2.
1. Compute Valencia Company’s gross margin percentage, the return on sales, and the return on stockholders’ equity for 20X1 and 20X2.
2. As a stockholder, would you have been pleased about the change in performance between 20X1 and 20X2? Explain why or whynot.

  • CreatedNovember 19, 2014
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