The Following Selected Data Were Taken from the Financial Statements

question 83

Essay

The following selected data were taken from the financial statements of the Winter Group for the three most recent years of operations:
$\begin{array}{|l|r|r|r|}\hline&\text { Dec. 31, } &\text { Dec. 31, }&\text { Dec. 31, }\\&\text { Year 3 }&\text { Year 2 }&\text { Year 1 }\\\hline \text { Total assets } & \$ 3,000,000 & \$ 2,700,000 & \$ 2,400,000 \\\hline \text { Notes payable } 10 \% \text { interest } & 1,000,000 & 1,000,000 & 1,000,000 \\\hline \text { Common stock } & 400,000 & 400,000 & 400,000 \\\hline \text { Preferred } \$ 6 \text { stock, } \$ 100 \text { par } & 200,000 & 200,000 & 200,000 \\\hline \text { Retained earnings } & 1,126,000 & 896,000 & 600,000 \\\hline\end{array}$ 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 rate earned on assets,the rate earned on stockholders' equity,and the rate earned on common stockholders' equity for Years 2 and 3.Round to one decimal place.
b. What conclusion can be drawn from these data as to the company's profitability?

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Definitions:

Spontaneous Recovery

After a pause in exposure to the conditioned stimulus, a once suppressed conditioned response emerges again.

Higher-Order Conditioning

A process in classical conditioning by which a stimulus that was previously neutral becomes conditioned by being paired with another conditioned stimulus.

Extinction

In behavioral psychology, the gradual weakening and eventual disappearance of a conditioned response.

Stimulus Generalization

The psychological phenomenon where a response to a specific stimulus becomes triggered by stimuli that are similar in nature.