Nineteen Measures of Solvency and Profitability The comparative financial statem
ID: 2482370 • Letter: N
Question
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 $1,309,800 $1,113,400
Add net income for year 292,000 228,000
Total $1,601,800 $1,341,400
Deduct dividends
On preferred stock $9,100 $9,100
On common stock 22,500 22,500
Total $31,600 $31,600
Retained earnings, December 31 $1,570,200 $1,309,800
Blige Inc. Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
2016 2015
Sales $2,090,900 $1,923,600
Sales returns and allowances 10,400 6,760
Sales $2,080,500 $1,916,840
Cost of goods sold 677,440 623,240
Gross profit $1,403,060 $1,293,600
Selling expenses $513,570 $614,680
Administrative expenses 437,480 361,010
Total operating expenses 951,050 975,690
Income from operations $452,010 $317,910
Other income 23,790 20,290 $475,800 $338,200
Other expense (interest) 144,000 79,200
Income before income tax $331,800 $259,000
Income tax expense 39,800 31,000
Net income $292,000 $228,000
Blige Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
Dec. 31, 2016 Dec. 31, 2015
Assets
Current assets
Cash $373,390 $306,560
Temporary investments 565,130 508,010
Accounts receivable (net) 357,700 335,800
Inventories 262,800 204,400
Prepaid expenses 70,640 61,310
Total current assets $1,629,660 $1,416,080
Long-term investments 863,760 255,773
Property, plant, and equipment (net) 1,980,000 1,782,000
Total assets $4,473,420 $3,453,853
Liabilities
Current liabilities $543,220 $594,053
Long-term liabilities
Mortgage note payable, 8%, due 2021 $810,000 $0
Bonds payable, 8%, due 2017 990,000 990,000
Total long-term liabilities $1,800,000 $990,000
Total liabilities $2,343,220 $1,584,053
Stockholders' Equity
Preferred $0.7 stock, $20 par $260,000 $260,000
Common stock, $10 par 300,000 300,000
Retained earnings 1,570,200 1,309,800
Total stockholders' equity $2,130,200 $1,869,800
Total liabilities and stockholders' equity $4,473,420 $3,453,853
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.
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 %
Explanation / Answer
Ans1 Working Capital Current assets-Current Liabilities 1629660-543220 1086440 Ans 2 Current ratio Current assets/Current Liabilities 1629660/543220 3 Ans 3 Quick ratio Current assets-prepaid expenses-Inventory/Current Liabilities (1629660-262800-70640)/543220 2.4 Ans 4 Accounts receivable Trnover Net Credit sales/Avg Accounts receivable 2080500/((357700+335800)/2) 6 Ans 5 Number of days' sales in receivables days 365/Accounts Receivable Turnover ratio=365/6 60.8 Ans 6 Inventory turnover Ratio COGS/Avg Inventory 677440/((262800+204400)/2) 2.9 Ans 7 No. odf days sales in Inventory sales 365/Inventory Turnover ratio 365/2.9 125.9 Ans 8 Ratio of fixed assetd to long term liabilities 1980000/1800000 1.1 Ans 9 Ratio of liabilities to stockholders' equity 2343220/2130200 1.1 Ans 10 Interest Coverage Ratio EBIT/Interest expense 452010/144000 3.1 Dear student there are various subparts I have answerd first 10
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