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Question
The following selected data were taken from the financial statements of the Winter Group for the 3 most recent years of operations:
| Dec. 31, Year 3 | Dec. 31, Year 2 | Dec. 31, Year 1 | |
| Total assets | $3,000,000 | $2,700,000 | $2,400,000 |
| Notes payable (10% interest) | 1,000,000 | 1,000,000 | 1,000,000 |
| Common stock | 400,000 | 400,000 | 400,000 |
| Preferred $6 stock, $100 par | 200,000 | 200,000 | 200,000 |
| Retained earnings | 1,126,000 | 896,000 | 600,000 |
The Year 3 net income was $242,000, and the Year 2 net income was $308,000. No dividends on common stock were declared during the 3 years.
a. Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity for Years 2 and 3. (Round percentages to one decimal place.)
b. What conclusions can be drawn from these data as to the company's profitability?
Answer
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