Question

Nineteen Measures of The ability of a firm to pay its debts as they come due.Solvency and The ability of a firm to earn income.Profitability

The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $71 on December 31, 2016.

Blige Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 2016 and 2015
			2016		2015
Retained earnings, January 1			$2,474,150		$2,101,950
Add net income for year			570,000		430,500
Total			$3,044,150		$2,532,450
Deduct dividends
	On preferred stock		$7,000		$7,000
	On common stock		51,300		51,300
		Total	$58,300		$58,300
Retained earnings, December 31			$2,985,850		$2,474,150

Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
	2016		2015
Sales	$3,288,585		$3,025,500
Sales returns and allowances	16,360		10,630
Sales	$3,272,225		$3,014,870
Cost of goods sold	1,165,080		1,071,870
Gross profit	$2,107,145		$1,943,000
Selling expenses	$690,680		$861,540
Administrative expenses	588,355		505,990
Total operating expenses	1,279,035		1,367,530
Income from operations	$828,110		$575,470
Other income	43,590		36,730
	$871,700		$612,200
Other expense (interest)	224,000		123,200
Income before income tax	$647,700		$489,000
Income tax expense	77,700		58,500
Net income	$570,000		$430,500

Blige Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
			Dec. 31, 2016		Dec. 31, 2015
Assets
Current assets
	Cash		$638,430		$599,200
	Temporary investments		966,270		992,970
	Accounts receivable (net)		613,200		576,700
	Inventories		467,200		365,000
	Prepaid expenses		120,775		119,840
		Total current assets	$2,805,875		$2,653,710
Long-term investments			1,820,240		1,046,746
Property, plant, and equipment (net)			3,080,000		2,772,000
Total assets			$7,706,115		$6,472,456
Liabilities
Current liabilities			$850,265		$1,388,306
Long-term liabilities
	Mortgage note payable, 8%, due 2021		$1,260,000		$0
	Bonds payable, 8%, due 2017		1,540,000		1,540,000
		Total long-term liabilities	$2,800,000		$1,540,000
Total liabilities			$3,650,265		$2,928,306
Stockholders' Equity
Preferred $0.7 stock, $50 par			$500,000		$500,000
Common stock, $10 par			570,000		570,000
Retained earnings			2,985,850		2,474,150
	Total stockholders' equity		$4,055,850		$3,544,150
Total liabilities and stockholders' equity			$7,706,115		$6,472,456

Required:

Determine the following measures for 2016, 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.

12. Ratio of sales to assets
13. Rate earned on total assets		%

Answer 1

Solution:

Determining the Following Measures for 2016:

12) Ratio of Sales to Assets:

Therefore, the Ratio of Sales to Assets is 0.58.

13) Rate Earned on Total Assets:

Therefore, the Rate Earned on Total Assets is 0.11.