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    Net Income to Total Assets and Stockholder's Equity

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    Jodie Foster Care Homes, Inc., shows the following:

    Year Net Income Total Assets Stockholder's Equity Total Debt
    2011 $118,000 $1,900,000 $700,000 $1,200,000
    2012 131,000 1,950,000 950,000 1,000,000
    2013 148,000 2,010,000 1,100,000 910,000
    2014 175,700 2,050,000 1,420,000 630,000

    a. Compute the ratio of net income to total assets for each year and comment on the trend.
    b. Compute the ratio of net income to stockholder's equity and comment on the trend.
    Explain why there may be a difference in trends between parts a and b.

    © BrainMass Inc. brainmass.com October 10, 2019, 8:08 am ad1c9bdddf
    https://brainmass.com/business/capital-structure-and-firm-value/609761

    Solution Preview

    Solution:

    a. Net Income / Total Assets

    2011 $118,000 / $1,190,000 = 6.21%
    2012 $131,000 / $1,950,000 = 6.72%
    2013 $148,000 / $2,010,000 = 7.36%
    2014 $175,700 / $2,050,000 = 8.57%

    Comment: There ...

    Solution Summary

    The attached file contains a detailed example and illustration for the calculation of net Income to total assets and stockholder's equity.

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