Problem G (20 points) PROBLEM STATEMENT ANALYSIS Condensed data taken from the b

Question

Problem G (20 points) PROBLEM STATEMENT ANALYSIS Condensed data taken from the balance sheet at the end of the current year are as folows Asents Marketable securities Accounts receivable Merchandise inventory Prepaid expenses Fixed assets (net) s 300,000 125,000 275,000 1,200,000 6,000 Accounts payable Notes payable (short-derm, non-interest-bearing) Accrued liabilses Bonds payable, 10%, due in 2013. Preferred g% stock, $50 par Common stock, $20 par Paid-in capital in excess of Retained earnings 400,000 250,000 100,000 2,000,000 500,000 300,000 100,000 326,000 stock Selected data related to the 12 months of the current year indicate the following: Average accounts receivable Average common stockholders' equity Average stockholders equity Average total assets Cash dividends paid on common stock Income before income tax Interest expense Net income Net sales (on account) $ 300,000 700,000 1,200,000 3,.400,000 111,000 50,000 250,000 2,000,000 The common stock was selling for $75 per share at the end of the current year INSTRUCTIONS: Compute the analytical measures Iisted below, rounding to one decimal point, and insert the answers in the Answers column. For Answers 2.8 0 Ratio of fixed assets to long-term liabilities 1 Quick ratio 2. Current ratio 3. Working capital 4. Accounts receivable turnover 5. Rate earned on total assets 6. Rate earned on common stockholders' equity 7. Number of times interest charges earned 8. Earnings per share on common stock 9. Price-earnings ratio on common stock 10. Dividend yield on common stock

Explanation / Answer

1.Quick Ratio = it says how well a company can meet its short term financial liablities. the formula is =

(Cash and cash equivalents+ Marketable securities+ accounts receivable)/Current liabilities

= (300,000+125,000+275,000)/(400,000+250,000+100,000) = 0.9333 or 93.33%

2.Current Ratio = This is Current assets / current liabilities

Current assets = 300,000+125,000+275,000+1,200,000+76,000 = $1,976,000

Current Liabilities = 400,000+250,000+100,000 = 750,000

Current ratio = 1,976,000/750,000 = 2.634 i.e. 263.4%

3. Working capital= this is current assets - current liabilities

                              = 1,976,000-750,000 = $1,226,000

4. Accounts receivable turnover ratio = Sales/average Accounts receivable

                                                              = 2,000,000/300,000 = 6.667 times

Problem A : Fill in the blanks -

1. Common stock

2. Subsidiary or subsidiaries or Joint Ventures

3. a. Common stock

4. Preferred equity

5. Debentures and bonds

6. Deferred tax asset

7. Held to maturity securities

8. Trading securities

9. Amortized cost - HTM securities are valued at amortized cost as per IFRS

10. Fair value - Trading are held for trading thus valued at Fair value

11. Available for sale securities

12. Interest

13. Long term investments - acquisition of any company is for the long term purposes thus long term investments

14. INvestment level. - whether short term and type of investments - HTM, trading or AFS

15. Equity method

16. Divided revenue

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