Nineteen Measures of Solvency and Profitability The comparative financial statem

Question

Nineteen Measures of Solvency and Profitability

The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $67 on December 31, 2014.

For the Years Ended December 31, 2014 and 2013

Required:

Determine the following measures for 2014, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.

For the Years Ended December 31, 2014 and 2013

Explanation / Answer

1. Working capital = Current assets-current liabilities

= (1686168-510960)

Working capital = 1175208

2. Current ratio = Current assets/current liabilities

= 1686168/510960

Current ratio = 3.3

3. Quick ratio = (current assets-account receivable-inventory)/Currrent liabilities

= (1686168-292000-69488)/510960

Quick ratio = 2.6

4.Account receivable turnover = Net sales/average receivable

= 2030860/390550

Account receivable turnover = 5.2

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

= 365/5.2

Number of days's sale in receivable = 70.2 days

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