The Following Return on Investment Ratios Were Computed for Steven

question 9

Essay

The following return on investment ratios were computed for Steven Company:
$$\begin{array} { l l l l l l } & \underline{2010} & \underline{2009}& \underline{2008} &2007\\\text { Return on assets } & { 12 \% } & { 15 \% } & { 15 \% } & { 18 \% } \\\text { Return on equity } & 12 \% & 15 \% & 11 \% & 20 \%\end{array}$$ Requirements:
A.Compute financial leverage percentage for each year.
B.Explain briefly the stockholders' advantage or disadvantage for each year.

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Definitions:

Seasonal Variation

Regular fluctuations in a time series variable within a year, often related to the seasons.

Random Variation

The unpredictable changes in data that cannot be attributed to any specific cause.

Time Series

A time series is a sequence of data points, typically consisting of successive measurements taken at spaced intervals over time, used in statistical and economic analysis.

Five-period Moving Average

A technique in time series analysis, calculating the average of a specific number of the most recent periods, in this case, five, to smoothen short-term fluctuations and highlight longer-term trends or cycles.