Question

Nineteen Measures of Solvency and Profitability

The comparative financial statements of Bettancort Inc. are as follows. The market price of Bettancort Inc. common stock was $71.25 on December 31, 2016.

Bettancort Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 2016 and 2015
			2016		2015
Retained earnings, January 1			$2,655,000		$2,400,000
Add net income for year			300,000		280,000
Total			$2,955,000		$2,680,000
Deduct dividends:
	On preferred stock		$15,000		$15,000
	On common stock		10,000		10,000
		Total	$25,000		$25,000
Retained earnings, December 31			$2,930,000		$2,655,000

Bettancort Inc.
Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
	2016		2015
Sales (all on account)	$1,212,000		$1,010,000
Sales returns and allowances	12,000		10,000
Sales	$1,200,000		$1,000,000
Cost of goods sold	500,000		475,000
Gross profit	$700,000		$525,000
Selling expenses	$240,000		$200,000
Administrative expenses	180,000		150,000
Total operating expenses	$420,000		$350,000
Income from operations	$280,000		$175,000
Other income	166,000		225,000
	$446,000		$400,000
Other expense (interest)	66,000		60,000
Income before income tax	$380,000		$340,000
Income tax expense	80,000		60,000
Net income	$300,000		$280,000

Bettancort Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
			Dec. 31, 2016		Dec. 31, 2015
Assets
Current assets:
	Cash		$450,000		$400,000
	Marketable securities		300,000		260,000
	Accounts receivable (net)		130,000		110,000
	Inventories		67,000		58,000
	Prepaid expenses		153,000		139,000
		Total current assets	$1,100,000		$967,000
Long-term investments			2,350,000		2,200,000
Property, plant, and equipment (net)			1,320,000		1,188,000
Total assets			$4,770,000		$4,355,000
Liabilities
Current liabilities			$440,000		$400,000
Long-term liabilities:
	Mortgage note payable, 8%, due 2021		$100,000		$0
	Bonds payable, 5%, due 2017		1,000,000		1,000,000
		Total long-term liabilities	$1,100,000		$1,000,000
Total liabilities			$1,540,000		$1,400,000
Stockholders' Equity
Preferred $0.75 stock, $10 par			$200,000		$200,000
Common stock, $10 par			100,000		100,000
Retained earnings			2,930,000		2,655,000
	Total stockholders' equity		$3,230,000		$2,955,000
Total liabilities and stockholders' equity			$4,770,000		$4,355,000

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		%

Answer 1

1) Working capital = current assets - current liabilities

Current ratio = current assets / current liab.

quick ratio = (current assets - inventory - prepaid expenses) / current liab.

Accounts receivables = net sales / avergae accounts receivables

	2016	2015
Current asset	$11,00,000	967000
Current liab	$4,40,000	$4,00,000
Inventory	$67,000	$58,000
Prepaid expenses	$1,53,000	$1,39,000
Accounts receivables	$1,30,000	$1,10,000
Net sales	$12,00,000	$10,00,000
Working capital	$6,60,000	$5,67,000
Current ratio	2.50	2.42
Quick ratio	2.00	1.93
Accounts receivables turonver	9.23	9.09