PR 14-4B Measures of liquidity, solvency and profitability Obj. 3, 4, 5 9. Ratio
ID: 2403557 • Letter: P
Question
PR 14-4B Measures of liquidity, solvency and profitability Obj. 3, 4, 5 9. Ratio f liabilities The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel equity, 0.4 to stockholders'common stock was $119.70)on December 31, 20Y2. Stargel Inc Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 EXCEL TEMPLATE Net income Total Dividends $5,375,000 $4,545,000 925,000 6275,000 $5470,000 On preferred stock 45,000 45,000 50,000 50,000 Total dividends Retained earnings, December 31 8 0.000 $5.375.000Explanation / Answer
1
Working Capital
Current Assets
-
Current Liabilities
Working Capital
20X2
$ 3,690,000.00
-
$ 900,000.00
$ 2,790,000.00
2
Current Ratio
Numerator
/
denominator
Current Ratio
Current Assets
/
Current liabilities
Current Ratio
20X2
$ 3,690,000.00
/
$ 900,000.00
4.1
to 1
3
Quick Ratio
Numerator
/
denominator
Quick Ratio
Liquid Assets
/
Current liabilities
Quick Ratio
20X2
$ 2,500,000.00
$ 900,000.00
2.8
to 1
Quick assets are Current assets minus Inventories.
4
Accounts Receivable Turnover
Numerator
/
denominator
Accounts Receivable Turnover
Sales
/
Average Accounts Receivables
Accounts Receivable Turnover
20X2
$ 10,000,000.00
$ 625,000.00
16
Times
Average Accounts Receivables ((510000+740000)/2)
5
Number of days sales in Receivables
Numerator
/
denominator
Number of days sales in Receivables
Accounts Receivables
/
Sales
Number of days sales in Receivables
20X2
$ 740,000.00
/
(10000000)/365
$ 27
days
Total sales are assumed to be Total Credit sales.
6
Inventory Turnover
Numerator
/
denominator
Inventory Turnover
COGS
/
Average Inventory
Inventory Turnover
20X2
$ 5,350,000.00
/
$ 1,070,000.00
5.0
times
Average Inventory ((1190000+950000)/2)
1
Working Capital
Current Assets
-
Current Liabilities
Working Capital
20X2
$ 3,690,000.00
-
$ 900,000.00
$ 2,790,000.00
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