Your friend, another accountant, has bet you that with your knowledge of account

Question

Your friend, another accountant, has bet you that with your knowledge of accounting and just the computations for common analytical measures, you can figure out many aspects of a company's financial statements. You take the bet Match each computation to one of the liquidity and solvency measures in the table. (Hint: Begin by looking for simple computations and identiying the amounts in those computations. Look for other measures that use those amounts) Liquidity and Solvency Measures Computations Ratio of liabilities to stockholders' equity $2,530,000+$4,079,000 970,500+$127.000)+$127.000 $3,095,000-$840,000 S Times interest earned Working capital Number of days' sales in inventory Accounts recelivable turnover Quick ratio Current ratio Number of days' sales in receivables Ratio of fixed assets to long-term liabilities $8,250,000S714,000+$740.000) 2) 3,095,000 +$840,000 714 $2,690,000+$1,690,000 Inventory turnover 10710 Check My Work gnment Score: 35.14% Save and Exit

Explanation / Answer

Balance Sheet December 31,20Y6 Current Assets Cash 823000 Marketable securities 329000 Accounts Receivable (net) 714000 Inventory 1072000 Prepaid expenses 157000 Total current assets 3095000 Long-term investments 824000 Property,plant and equipment, net 2690000 Total Assets 6609000 Liabilities Current Liabilities 840000 Long-term liabilities 1690000 Total liabilities 2530000 Stockholders' equity Preferred stock, $10 par 487500 Common stock, $5 par 1250000 Retained earnings 2341500 Total Stockholders' equity 4079000 Total liabilities and stockholders' equity 6609000 Comparative Income Statement for the years ended December 31, 20Y5 and 20Y6 Increase / (Decrease) 20Y6 20Y5 Amount % Sales 8250000 7257000 993000 13.68% Cost of goods sold 4100000 3444000 656000 19.05% Gross Profit 4150000 3813000 337000 8.84% Selling expenses 1999200 1451000 548200 37.78% Administrative Expenses 1237500 1101500 136000 12.35% Total operating Expenses 3236700 2552500 684200 26.81% Income from operations 913300 1260500 -347200 -27.54% Interest Expense 127000 120600 6400 5.31% Income before income tax 786300 1139900 -353600 -31.02% Income tax expense 65000 178200 -113200 -63.52% Net Income 721300 961700 -240400 -25.00%

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