E12-24 Lofty Exploration Company reported these figures for 2012 and 2011:

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E12-24 Evaluating profitability [10–15 min]
Lofty Exploration Company reported these figures for 2012 and 2011:

			2012	2011
Income Statement—partial:
Interest expense Net Income			12,400,000	17,400,000
Net Income			17,900,000	19,100,000
Balance Sheet—partial:
Total assets			328,000,000	318,000,000
Preferred stock, $2, no-par, 150,000 shares
authorized, issued and outstanding			2,400,000	2,400,000
Common stockholders’ equity			178,000,000	171,000,000
Retained earnings			4,000,000	3,000,000
Total stockholders’ equity			184,400,000	176,400,000

Requirements

1. Compute rate of return on total assets and rate of return on common stock- holders’ equity for 2012.

2. Do these rates of return suggest strength or weakness? Give your reason.