Profitability Ratios The following selected data were taken from the financial statements of Vidahill Inc....
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Profitability Ratios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 2017, 2086, and 20Y5: December 31 2017 2016 20Y5 Total assets $204,000 $184,000 $164,000 Notes payable (8% interest) 70,000 70,000 70,000 28,000 28,000 28,000 Common stock Preferred 6% stock, $100 par 14,000 14,000 14,000 (no change during year) Retained earnings 82,120 55,040 42,000 The 2017 net income was $27,920, and the 20Y6 net income was $13,880. No dividends on common stock were declared between 2015 and 2017. Preferred dividends were declared and paid in full in 2046 and 2017. a. Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity for the years 2016 and 2017. Round percentages to one decimal place. 2017 2016 Return on total assets 48 X % 21.6 X % Return on stockholders' equity 22.5 X % 14.3 X % Return on common stockholders' equity 11.2 X % 13.4 X % X the return on b. The profitability ratios indicate that the company's profitability has improved . Since the rate of return on total assets is less than stockholders' equity in both years, there must be positive leverage from the use of debt
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