The Following Selected Data Were Taken from the Financial Statements

question 100

Essay

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

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Definitions:

African Americans

African Americans are a racial or ethnic group in the United States with ancestry from the black racial groups of Africa.

American Indians

Indigenous peoples of the United States, including numerous tribes, each with their own distinct cultures and history.

European Americans

Individuals in the United States who trace their ancestry to Europe.

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A substance secreted by the pancreas that controls the levels of sugar in the blood by enabling glucose to be absorbed into body tissues.