Prepare four line graphs with the ratio on the vertical axis

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Reference no: EM132908504

Problem - Solvency and profitability trend analysis - Haviland Company has provided the following comparative information:

 

2012

2011

2010

2009

2008

Net income

$2,785,860

$1,857,240

$1,386,000

$924,000

$700,000

Interest expense

736,442

624,103

538,020

427,000

350,000

Income tax expense

612,786

422,611

320,160

220,800

160,000

Total assets (ending balance)

16,321,384

12,554,911

9,511,296

6,993,600

5,640,000

Total stockholders' equity (ending balance)

9,653,100

6,867,240

5,010,000

3,624,000

2,700,000

Average total assets

14,438,147

11,033,103

8,252,448

6,316,800

4,820,000

Average stockholders' equity

8,260,170

5,938,620

4,317,000

3,162,000

2,350,000

You have been asked to evaluate the historical performance of the company over the last five years.

Selected industry ratios have remained relatively steady at the following levels for the last five years:

 

2008-2012

Rate earned on total assets

18%

Rate earned on stockholders' equity

22%

Number of times interest changes earned

3.0

Ratio of liabilities to stockholders' equity

1.5

Instructions -

1. Prepare four line graphs with the ratio on the vertical axis and the years on the horizontal axis for the following four ratios (rounded to one decimal place):

a. Rate earned on total assets

b. Rate earned on stockholders' equity

c. Number of times interest charges earned

d. Ratio of liabilities to stockholders' equity

Display both the company ratio and the industry benchmark on each graph. That is, each graph should have two lines.

2. Prepare an analysis of the graphs in (1).

Reference no: EM132908504

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