Obj. 3, 4, PR 14-4B Measures of liquidity, solvency and profitability 3. hatio o

Question

Obj. 3, 4, PR 14-4B Measures of liquidity, solvency and profitability 3. hatio of liabilities The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel to stockholders' equity, 0.4 common stock was $119.70 on December 31, 20Y2. Stargel Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 EXCEL TEMPLATE $5,375,000 $4,545,000 925,000 $5,470,000 900,000 ..$6,275,000 Dividends: 45,000 45,000 50,000 5 95,000 95,000 On preferred stock 50,000 Retained earnings, December 31 180,000 $5,375,000

Explanation / Answer

1. Working capital = Current assets-current liabilities

= 3690000-900000

Working capital = 2790000

2. Current ratio = current assets/current liabilities

= 3690000/900000

Current ratio = 4.1 times

3. Quick ratio = (Cash+marketable security+account receivable)/Current liabilities

= (500000+1010000+740000)/900000

Quick ratio = 2.5 times

4. Account receivable turnover = Net sales/average receivable

= 10000000/675000

Account receivable turnover = 14.8 times

5. Number of days' sales in receivable = 365/Account receivable turnover

= 365/14.8

Number of days' sales in receivable = 24.6 days

6. Inventory turnover = Cost of goods sold/average inventory

= 5350000/1005000

Inventory turnover = 5.3 times

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