Obj. 3,4,5 PR 14-4B Measures of liquidity, solvency and profitability Ratio of l

Question

Obj. 3,4,5 PR 14-4B Measures of liquidity, solvency and profitability Ratio of liabilities to stockholders The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel common stock was $119.70 on December 31, 20Y2. equity, 0.4 Stargel Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 EXCEL TEMPLATE $5,375,000 $4,545,000 00,000 925,000 %275,000 $5,470,000 ...$ Net income Total Dividends: On preferred stock ...$ 45,000 45,000 50,000 50,000 s 95,000 95,000 $5,375,000 Retained earnings, December 31 ss,180,000 ,

Explanation / Answer

1 Current assets 3690000 Current liabilities 900000 Working capital = Current assets - current liabilities Working capital 2790000 2 Current ratio = Current assets / current liabilities Current ratio 4.1 3 Acid test ratio = Liquid assets / current liabilities Liquid assets = current assets - prepaid expense - merchandise inventory Liquid assets 2250000 Current liabilities 900000 Acid test ratio 2.5 4 Accounts receivable turnover = net credit sales /Average accounts receivable Net sales 10000000 Beginning accounts receivable 510000 Ending accounts receivable 740000 Average accounts receivable 625000 Accounts receivable turnover 16.0 5 Days sales outstanding = 365 / accounts receivable tunover Days sales outstanding 22.8 6 Inventory turnover = Cost of goods sold / Average inventory Cost of goods sold 5350000 Beginning inventory 950000 Ending inventory 1190000 Average inventory 1070000 Average inventory = (Beginning + Ending )/2 Inventory turnover 5.0 7 Days sale in inventory = 365 / inventory turnover Days sales in inventory 73

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