Exercise 11-13 2017 2016 Net income Dividends declared for preferred stockholder
ID: 2530497 • Letter: E
Question
Exercise 11-13
2017
2016
Net income
Dividends declared for preferred stockholders
Average common stockholders’ equity
Total assets
Current liabilities
Total liabilities
2017
2016
Return on common stockholders’ equity ratio
2017
2016
Debt to assets ratio
Exercise 11-13
Your answer is incorrect. Try again. Blue Spruce Corp. decided to issue common stock and used the $265,500 proceeds to redeem all of its outstanding bonds on January 1, 2017. The following information is available for the company for 2017 and 2016.2017
2016
Net income
$ 187,500 $ 152,500Dividends declared for preferred stockholders
6,900 6,900Average common stockholders’ equity
1,103,000 741,000Total assets
1,405,000 1,144,000Current liabilities
164,000 164,000Total liabilities
302,000 403,000(a)
Compute the return on common stockholders’ equity for both years. (Round answers to 1 decimal place, e.g. 12.5%.)
2017
2016
Return on common stockholders’ equity ratio
enter return on common stockholders equity in percentages % enter return on common stockholders equity in percentages %(c1)
Compute the debt to assets ratio for both years. (Round answers to 1 decimal place, e.g. 12.5%.)
2017
2016
Debt to assets ratio
enter debt to assets ratio in percentages % enter debt to assets ratio in percentages %Explanation / Answer
Return on common stockholders’ equity ratio
= (Net Income after Preferred dividend / Average common stockholders’ equity) * 100
In 2017 = (180,600 / 1,103,000) * 100 = 16.3735267452 = 16.4% (approx.)
In 2016 = (145,600 / 741,000) * 100 = 19.649122807 = 19.65% (Approx)
Debt to assets ratio
= (Total Liabilities / Total Assets) * 100
In 2017 = (302,000 / 1,405,000) * 100 = 21.4946619217 = 21.5%
In 2016 = (403,000 / 1,144,000) * 100 = 35.2272727272 = 35.2%
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