Question:
Jodie Foster Care Homes, Inc., shows the following data:
| Year |
Net Income |
Total Assets |
Stockholder's equilty |
Total Debt |
| 2007 |
$118,000 |
$1,900,000 |
$700,000 |
$1,200,000 |
| 2008 |
$131,000 |
1,950,000 |
950,000 |
1,000,000 |
| 2009 |
148,000 |
2,010,000 |
1,100,000 |
910,000 |
| 2010 |
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 stockholders’ equity and comment on the trend. Explain why there may be a difference in the trends between parts a and b.