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, 2016.

Blige Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 2016 and 2015
			2016		2015
Retained earnings, January 1			$1,928,600		$1,628,300
Add net income for year			456,000		333,500
Total			$2,384,600		$1,961,800
Deduct dividends
	On preferred stock		$5,600		$5,600
	On common stock		27,600		27,600
		Total	$33,200		$33,200
Retained earnings, December 31			$2,351,400		$1,928,600

Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
	2016		2015
Sales	$2,461,400		$2,264,500
Sales returns and allowances	12,250		7,960
Sales	$2,449,150		$2,256,540
Cost of goods sold	950,460		874,420
Gross profit	$1,498,690		$1,382,120
Selling expenses	$461,380		$594,180
Administrative expenses	393,020		348,960
Total operating expenses	854,400		943,140
Income from operations	$644,290		$438,980
Other income	33,910		28,020
	$678,200		$467,000
Other expense (interest)	160,000		88,000
Income before income tax	$518,200		$379,000
Income tax expense	62,200		45,500
Net income	$456,000		$333,500

Blige Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
			Dec. 31, 2016		Dec. 31, 2015
Assets
Current assets
	Cash		$310,850		$506,270
	Temporary investments		470,480		838,970
	Accounts receivable (net)		459,900		430,700
	Inventories		350,400		262,800
	Prepaid expenses		58,818		101,250
		Total current assets	$1,650,448		$2,139,990
Long-term investments			1,730,072		919,490
Property, plant, and equipment (net)			2,400,000		2,160,000
Total assets			$5,780,520		$5,219,480
Liabilities
Current liabilities			$569,120		$1,330,880
Long-term liabilities
	Mortgage note payable, 8%, due 2021		$900,000		$0
	Bonds payable, 8%, due 2017		1,100,000		1,100,000
		Total long-term liabilities	$2,000,000		$1,100,000
Total liabilities			$2,569,120		$2,430,880
Stockholders' Equity
Preferred $0.7 stock, $50 par			$400,000		$400,000
Common stock, $10 par			460,000		460,000
Retained earnings			2,351,400		1,928,600
	Total stockholders' equity		$3,211,400		$2,788,600
Total liabilities and stockholders' equity			$5,780,520		$5,219,480

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.

1. Working capital	$
2. Current ratio
3. Quick ratio
4. Accounts receivable turnover
5. Number of days' sales in receivables		days
6. Inventory turnover
7. Number of days' sales in inventory		days
8. Ratio of fixed assets to long-term liabilities
9. Ratio of liabilities to stockholders' equity
10. Number of times interest charges are earned
11. Number of times preferred dividends are earned
12. Ratio of sales to assets
13. Rate earned on total assets		%
14. Rate earned on stockholders' equity		%
15. Rate earned on common stockholders' equity		%
16. Earnings per share on common stock	$
17. Price-earnings ratio
18. Dividends per share of common stock	$
19. Dividend yield		%

Check My Work2 more Check My Work uses remaining.

Answer 1

Answer to Part 1.

Working Capital = Current Assets – Current Liabilities
Working Capital = $1,650,448.00 - $569,120.00
Working Capital = $1,081,328.00

Answer to Part 2.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $1,650,448 / $569,120
Current Ratio = 2.9 : 1

Answer to Part 3.

Quick Ratio = (Current Assets – Inventory- Prepaid Expenses) / Current Liabilities
Quick Ratio = ($1,650,448 - $350,400 - $58,818) / 569,120
Quick Ratio = 1,241,230 / 569,120
Quick Ratio = 2.2 : 1

Answer to Part 4.

Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
Average Accounts Receivable = (459,900 + 430,700) / 2
Average Accounts Receivable = $445,300

Accounts Receivable Turnover = 2,461,400 / 445,300
Accounts Receivable Turnover = 5.5 times