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v2 cengagenow.com/ilm/takeAssignment/takeAssignmentMain doinvokeraas eBook Show Me How Calculator Print item The following selected data were taken from the financial statements of Vidahill Inc. for December December 31 20Y7 20Y6 20Y5 Total assets Notes payable (8% interest) Common stock Preferred % stock, $100 par $262,000 90,000 36,000 18,000 $236,000$210,000 90,000 36,000 18,000 90,000 36,000 18,000 (no change during year) Retained earnings 92,610 70,500 54,000 The 2017 net income was $23,370, and the 20Y6 net income was $17,760. No dividends on commor Preferred dividends were declared and paid in full in 20Y6 and 2017 a. Determine the reture on total essets, the rate warned on stookhoiders eqvity, and the réturn on and 20Y7. when required, round to one decimal place. 20Y7 20Y6 Return on total assets Return on stockholders equity Retun on common stockholders equity b. The profitablity ratios indicate that Vidahill Inc's profitabiity return on

Explanation / Answer

Return on Total Assets = EBIT(net income + interest+dividend on prefered stock) Total Assets For FY 2017 For FY 2016 ROTA = 23370+8% of 90,000+7% of 18000 17,760+8% of 90,000+7% of 18000 262000 236000 = 12.1% 11.1% Return on Stockholders fund = Net income + Dividend of preferred stock Shareholders fund Shareholders fund = Common Stock + Preferred Stock + Retain Earnings For FY 2017 For FY 2016 Shareholders fund = 36000+18000+92610 36000+18000+70500 = 146610 124500 Return on Stockholders fund = 23,370+1,260 17,760+1,260 146610 124500 = 16.8% 15.3% Return on Common Stock = Net income Equity Shareholders fund Equity Shareholders fund = Common Stock + Retain Earnings For FY 2017 For FY 2016 Equity Shareholders fund = 36000+92610 36000+70500 = 128610 106500 Return on Stockholders fund = 23,370 17,760 128610 106500 = 18.2% 16.7%

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