Tilden Industries reported net sales revenue of $1,700,000 and paid no dividends during the current year. The following information is also available at the end of the current and prior years:Current YearPrior YearTotal Current Assets$1,000,000$ 900,000Property, Plant, and Equipment, Net1,700,0001,400,000Total Current Liabilities450,000390,000Total Long-Term Liabilities600,000500,000Common Stock, $5 Par1,000,0001,000,000Paid-In Capital in Excess of Par200,000200,000Retained Earnings450,000210,000There was no preferred stock outstanding during the current year.Required:Part a. Calculate the return on equity for the current year.Part b. Calculate the debt-to-assets ratio for the current year.Part c. Calculate the fixed asset turnover ratio for the current year.Part d. Calculate the

Question

current ratio for the current year.Round all ratios to two decimal points.

What will be an ideal response?

Answer 1

Part a
Average common stockholders' equity = (Beginning common stockholders' equity + Ending common stockholders' equity) ÷ 2
= [($1,000,000 + $200,000 + $210,000) + ($1,000,000 + $200,000 + $450,000)] ÷ 2 = $1,530,000
Return on equity (ROE) = (Net income ? preferred dividends) ÷ Average common stockholders' equity × 100
= [($240,000 ? $0) ÷ $1,530,000] × 100 = 15.69%

Part b
Debt-to-assets ratio = Total liabilities ÷ Total assets
= ($450,000 + $600,000) ÷ ($1,000,000 + $1,700,000) = 0.39

Part c
Fixed asset turnover ratio = Net revenue ÷ Average net fixed assets
Fixed asset turnover ratio = $1,700,000 ÷ [($1,700,000 + $1,400,000) ÷ 2] = 1.10

Part d
Current ratio = Current assets ÷ Current liabilities
= $1,000,000 ÷ $450,000 = 2.22