7.Travel Ventures reported the following information:
Total assets$450,000
Total liabilities240,000
Net income45,000
Required:
a.Compute return on assets and return on equity.
b.Explain the difference between the two ratios.
8.The following selected financial information is available for Pilamaya Co:
20072008
Total assets$22,50018,000
Current liabilities5,0002,000
Long-term debt10,0006,000
Common stock4,0004,000
Retained earnings3,5006,000
Sales17,00020,000
Net income3,3754,500
Required:
a.Compute return on equity for each year.
b.Compute return on assets for each year.
c.Discuss the changes in financial leverage from 2007 to 2008.