Merlin Company has provided the following information:

You have been asked to evaluate the historical performance of the company over the past five years. Merlin has no preferred shareholders.
Selected industry ratios have remained relatively steady at the following levels for the past five years:
__________________________________________2011-2015
Return on assets ..............................................12%
Return on common shareholders' equity ..................20%
Times interest earned ratio ..................................2.8 times
Debt ratio ......................................................40%
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. Return on assets
b. Return on common shareholders' equity
c. Times interest earned ratio
d. Debt ratio Display both the company ratio and the industry benchmark on each graph so that each graph shows two lines.
2. Prepare an analysis of the graphs in (1).

Transcribed Image Text:

2015 2013 2011 2014 2012 $ 419,900 $ 380,000 200.000 126,000 2.750,000 Net income $ 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 Interest expense 225.000 100,800 Income taxes expense Total assets (ending balance) Total shareholders' equity (ending balance) Average total assets Average shareholders' equity 3,338,500 880,000 2.475.000 690,000 1,599,709 3,535,472 1,449,805 1,904,365 4.270.764 1,839,431 1,774,497 3,928.397 1,687,103 1,299,900 3.044,250 1,089,950