Problem:
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
Q1. Compute the ratio of net income to total assets for each year and comment on the trend.
Q2. 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 1 and 2.