Nineteen Measures of Solvency and Profitability The comparative financial statem
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Nineteen Measures of Solvency and Profitability
The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $55 on December 31, 2016.
Required:
Determine the following measures for 2016, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.
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Nineteen Measures of Solvency and Profitability
The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $55 on December 31, 2016.
Blige Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 2016 and 2015 2016 2015 Retained earnings, January 1 $3,610,425 $3,069,075 Add net income for year 806,400 628,600 Total $4,416,825 $3,697,675 Deduct dividends On preferred stock $13,300 $13,300 On common stock 73,950 73,950 Total $87,250 $87,250 Retained earnings, December 31 $4,329,575 $3,610,425 Blige Inc. Comparative Income Statement For the Years Ended December 31, 2016 and 2015 2016 2015 Sales $5,040,180 $4,637,000 Sales returns and allowances 25,080 16,300 Sales $5,015,100 $4,620,700 Cost of goods sold 1,708,200 1,571,540 Gross profit $3,306,900 $3,049,160 Selling expenses $1,167,870 $1,404,330 Administrative expenses 994,850 824,770 Total operating expenses 2,162,720 2,229,100 Income from operations $1,144,180 $820,060 Other income 60,220 52,340 $1,204,400 $872,400 Other expense (interest) 288,000 158,400 Income before income tax $916,400 $714,000 Income tax expense 110,000 85,400 Net income $806,400 $628,600 Blige Inc. Comparative Balance Sheet December 31, 2016 and 2015 Dec. 31, 2016 Dec. 31, 2015 Assets Current assets Cash $826,100 $832,960 Temporary investments 1,250,320 1,380,340 Accounts receivable (net) 861,400 810,300 Inventories 642,400 496,400 Prepaid expenses 156,292 166,590 Total current assets $3,736,512 $3,686,590 Long-term investments 3,030,723 1,741,094 Property, plant, and equipment (net) 3,960,000 3,564,000 Total assets $10,727,235 $8,991,684 Liabilities Current liabilities $1,167,660 $1,771,259 Long-term liabilities Mortgage note payable, 8%, due 2021 $1,620,000 $0 Bonds payable, 8%, due 2017 1,980,000 1,980,000 Total long-term liabilities $3,600,000 $1,980,000 Total liabilities $4,767,660 $3,751,259 Stockholders' Equity Preferred $0.7 stock, $40 par $760,000 $760,000 Common stock, $10 par 870,000 870,000 Retained earnings 4,329,575 3,610,425 Total stockholders' equity $5,959,575 $5,240,425 Total liabilities and stockholders' equity $10,727,235 $8,991,684Required:
Determine the following measures for 2016, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.
1. Working capital $ 2. Current ratio 3. Quick ratio 4. Accounts receivable turnover 5. Number of days' sales in receivables days 6. Inventory turnover 7. Number of days' sales in inventory days 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities to stockholders' equity 10. Number of times interest charges are earned 11. Number of times preferred dividends are earned 12. Ratio of sales to assets 13. Rate earned on total assets % 14. Rate earned on stockholders' equity % 15. Rate earned on common stockholders' equity % 16. Earnings per share on common stock $ 17. Price-earnings ratio 18. Dividends per share of common stock $ 19. Dividend yield %Feedback
Could you please help with 8-19?Explanation / Answer
8. fixed assets to long term liability = fixed assets / long term liability
= 3030723 + 3960000 / 3600000
= 1.94
9. laibility to stockholder = Total liability / toal stockholder's equity
= 4767660 / 5959575
= 0.8
10. Number of times interest charges are earned = EBIT / interest expenses
= 1144180 / 288000
= 3.97
11. Number of times preferred dividends are earned = net income / preferrence dividend
= 806400 / 13300
= 60.6
12. sales to assets ratio = net sales / average total assets
= 5015100 / (8991684 + 10727235)/2
= 5015100 / 9859460
= 0.51
13. Rate earned on total assets = EBIT / total assets
= 1144180 / 10727235
= 10.67%
16. Earnings per share on common stock = Earning available to equity / number of outstanding shares
= (806400 - 13300) / ($870000 / $10)
= 793100 / 87000
=$9.12
17. Price-earnings ratio = market value / EPS
= 55 / 9.12
= 6.03
18. Dividends per share of common stock = dividend paid / number of shares
= $73950 / 87000 shares
= $0.85
19. Dividend yield = dividend per share / market price
= 0.85 / 55
= 1.5%
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