The Following Selected Data Were Taken from the Financial Statements

question 184

Essay

The following selected data were taken from the financial statements of the Berrol Group for December 31, 2012, 2011, and 2010:

The 2012 net income was $242,000 and the 2011 net income was $308,000. No dividends on common stock were declared between 2010 and 2012.
Required:
(1) Determine the rate earned on total assets, the rate earned on stockholders' equity, and the rate earned on common stockholders' equity for the years 2012 and 2011. Round to one decimal place.
(2) What conclusion can be drawn from these data as to the company's profitability?

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Definitions:

Experience

Practical interaction with the world and the knowledge we gain through it. Today the term science tends to be limited to those questions that can and must be answered by reference to experience and extrapolations from experience.

Extrapolations

Predictions or inferences about unknown data made based on known or observed information.

Rational

In accordance with the rules of effective thought concerning coherence, consistency, practicability, simplicity, comprehensiveness, looking at the evidence and weighing it carefully, not jumping to conclusions, and so on. Rationality may not guarantee truth; all the evidence and everything we believe may point to one conclusion, and yet later generations, who know things that we do not, may see that our conclusion was incorrect. It was rational thousands of years ago to believe that the earth was flat, even though it was not true. It is not rational for us to believe the same thing, for our evidence and all sorts of other beliefs indicate, rather, that it is rational to believe that the earth is (more or less) spherical.

Best Available Evidence

The most reliable and pertinent information and data available at the time to support a decision or conclusion.