The following financial information is for A. Galler Company for 2009, 2008, and 2007:
|
2009 |
2008 |
2007 |
|
|
Income before interest |
$4,400,000 |
$4,000,000 |
$3,300,000 |
|
Interest expense |
800,000 |
600,000 |
550,000 |
|
Income before tax |
3,600,000 |
3,400,000 |
2,750,000 |
|
Tax |
1,500,000 |
1,450,000 |
1,050,000 |
|
Net income |
$2,100,000 |
$1,950,000 |
$1,700,000 |
|
2009 |
2008 |
2007 |
|
|
Current liabilities |
$2,600,000 |
$2,300,000 |
$2,200,000 |
|
Long term debt |
7,000,000 |
6,200,000 |
5,800,000 |
|
Preferred stock (14%) |
100,000 |
100,000 |
100,000 |
|
Common equity |
$10,000,000 |
9,000,000 |
8,300,000 |
Required
a. For 2009, 2008, and 2007, determine the following:
1. Return on assets (using end of year total assets)
2. Return on investment (using end of year long term liabilities and equity)
3. Return on total equity (using ending total equity)
4. Return on common equity (using ending common equity)
b. Discuss the trend in these profit figures.
c. Discuss the benefit from the use of long term debt and preferred stock.