Question

The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc....

The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $64 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 $2,464,650 $2,084,550
Add net income for year 577,600 427,000
Total $3,042,250 $2,511,550
Deduct dividends
On preferred stock $7,000 $7,000
On common stock 39,900 39,900
Total $46,900 $46,900
Retained earnings, December 31 $2,995,350 $2,464,650
Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
    2016     2015
Sales $3,738,680 $3,439,600
Sales returns and allowances 18,600 12,090
Sales $3,720,080 $3,427,510
Cost of goods sold 1,357,800 1,249,180
Gross profit $2,362,280 $2,178,330
Selling expenses $799,360 $996,540
Administrative expenses 680,940 585,270
Total operating expenses 1,480,300 1,581,810
Income from operations $881,980 $596,520
Other income 46,420 38,080
$928,400 $634,600
Other expense (interest) 272,000 149,600
Income before income tax $656,400 $485,000
Income tax expense 78,800 58,000
Net income $577,600 $427,000
Blige Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
    Dec. 31, 2016     Dec. 31, 2015
Assets
Current assets
Cash $707,170 $589,200
Temporary investments 1,070,310 976,380
Accounts receivable (net) 686,200 642,400
Inventories 511,000 394,200
Prepaid expenses 133,787 117,840
Total current assets $3,108,467 $2,720,020
Long-term investments 1,688,768 548,174
Property, plant, and equipment (net) 3,740,000 3,366,000
Total assets $8,537,235 $6,634,194
Liabilities
Current liabilities $1,071,885 $1,229,544
Long-term liabilities
Mortgage note payable, 8%, due 2021 $1,530,000 $0
Bonds payable, 8%, due 2017 1,870,000 1,870,000
Total long-term liabilities $3,400,000 $1,870,000
Total liabilities $4,471,885 $3,099,544
Stockholders' Equity
Preferred $0.7 stock, $50 par $500,000 $500,000
Common stock, $10 par 570,000 570,000
Retained earnings 2,995,350 2,464,650
Total stockholders' equity $4,065,350 $3,534,650
Total liabilities and stockholders' equity $8,537,235 $6,634,194

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 %

Homework Answers

Answer #1
Requirement 1:
Working Capital:
A Current Assets 3108467
B Current Liabilities 1071885
C Working Capital (A-B) 2036582
Requirement 2:
Current Ratio:
A Current Assets 3108467
B Current Liabilities 1071885
C Current Ratio (A/B) 2.9
Requirement 3:
Quick Ratio:
A Cash 707170
B Temporary Investments 1070310
C Accounts Receivable 686200
D Quick Assets (A+B+C) 2463680
E Current Liabilities 1071885
F Quick Ratio (D/E) 2.3
Requirement 4:
Accounts Receivable Turnover:
A Sales 3720080
B Beginning Accounts Receivable 642400
C Ending Accounts Receivable 686200
D Average Accounts Receivable ((B+C)/2) 664300
E Accounts Receivable Turnover (A/D) 5.6
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