The Following Selected Data Were Taken from the Financial Statements

question 6

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:

Economic Profits

The surplus remaining after deducting both explicit and implicit costs from total revenues, often indicating the profitability beyond normal returns.

Competitive Market

A market structure characterized by numerous buyers and sellers, such that no single market participant has the power to significantly influence prices.

Market Price

The current price at which a good or service can be bought or sold.

Total Revenue

The total income generated by the sale of goods or services by a company.