Comparative Calendar Year Financial Data for a Company Are Shown

question 103

Essay

Comparative calendar year financial data for a company are shown below. Calculate the following ratios for 2018:
(a) return on total assets
(b) return on common stockholders' equity.
$\begin{array}{c}\begin{array}{|l|}\hline \\\hline \text {Sales}\\\hline \text {Gross profit}\\\hline \text {Income before taxes}\\\hline \text {Net income}\\\hline \\\hline \\\hline \\\hline \text {Liabilities}\\\hline \text {Common stock (\$12 par)}\\\hline \text {Contributed capital in excess of par}\\\hline \text {Retained earnings}\\\hline \text {Total liabilities and equity}\\\hline \end{array}\begin{array}{l|}\hline \underline{2018}\\\hline \underline{\$720,000} \\\hline \$ 270,000 \\\hline 79,200 \\\hline 51,200 \\\hline \\\hline \text { December } 31, \\\hline 2018 \\\hline \$ 493,500 \\\hline 180,000 \\\hline 135,000 \\\hline 204,000 \\\hline \$ 1,012,500 \\\hline\end{array}\begin{array}{l|}\hline \underline{2017}\\\hline\$ 607,500 \\\hline 224,800 \\\hline 78,700 \\\hline 51,700 \\\hline\\\hline \text { December } 31 \\\hline 2017\\\hline \$ 452,500 \\\hline 180,000 \\\hline 135,000 \\\hline 177,300 \\\hline \$ 944,800 \\\hline\end{array}\end{array}$

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Definitions:

Limits to Arbitrage

The constraints that prevent traders from exploiting price discrepancies in financial markets, thus allowing inefficiencies to persist longer than they would otherwise.

Trading Volume

It denotes the total number of shares or contracts traded for a specific security or market during a given period.

Bubble

A situation where observed prices soar far higher than fundamentals and rational analysis would suggest.

Crash

A situation where market prices collapse significantly and suddenly.