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

7 Number of days sales in inventory=(Average inventory/Cost of goos sold)*365 Average inventory=(Beginning inventory+Ending inventory)/2=(950000+1190000)/2=1070000 Number of days sales in inventory=(1070000/5350000)*365=73 days 8 Ratio of fixed assets to long-term liabilities=Fixed assets/Long term liabilities Fixed assets=Propert,plant and equipment=3740000 Ratio of fixed assets to long-term liabilities=3740000/1700000=2.2 9 Ratio of liabilities to stockholder's equity=Total liabilities/Total stockholder's equity=2600000/7180000=0.36 10 Times interest earned=Earnings before interest and tax/Interest expense Income before income tax 1130000 Add:Interest 170000 Earnings before interest and tax 1300000 Times interest earned=1300000/170000=7.65 times 11 Asset turnover=Sales/Average total assets Average total assets=(Beginning total assets+Ending total assets)/2=(9780000+8755000)/2=9267500 Asset turnover=10000000/9267500=1.08 12 Return on total assets=net income/Average Total assets=900000/9267500=0.097114=9.71%

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