Question: Addai Company has provided the following comparative information: You have been asked to evaluate the historical performance of the company over the last five years.
Addai Company has provided the following comparative information:
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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:
2010– 2014
Rate earned on total assets ........28%
Rate earned on stockholders’ equity .....18%
Number of times interest charges are earned. 2.7
Ratio of liabilities to stockholders’ equity... 0.4
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 are 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).
2014 2013 367,976 572,003 53,560 2011 631,176 S 884,000 800,000 495,000 160,000 2012 2010 Net income Interest expense Income tax expense Total assets (ending balance) Total stockholders'equity S 273,406 616,047 31,749 528,165 106,720 440,000 200,000 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 (ending balance) Average total assets Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 3,706,557 3,433,152 3,065,176 2,434,000 ,550,000 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000
Step by Step Solution
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1 a b c d The total liabilities are the difference between the total assets and total stockholders e... View full answer
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