Question

Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....

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 $62 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 $2,822,400 $2,389,100
Add net income for year 651,200 489,300
Total $3,473,600 $2,878,400
Deduct dividends
On preferred stock $8,400 $8,400
On common stock 47,600 47,600
Total $56,000 $56,000
Retained earnings, December 31 $3,417,600 $2,822,400


Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
    2016     2015
Sales $3,895,680 $3,584,000
Sales returns and allowances 19,380 12,600
Sales $3,876,300 $3,571,400
Cost of goods sold 1,403,060 1,290,820
Gross profit $2,473,240 $2,280,580
Selling expenses $836,910 $1,031,700
Administrative expenses 712,930 605,920
Total operating expenses 1,549,840 1,637,620
Income from operations $923,400 $642,960
Other income 48,600 41,040
$972,000 $684,000
Other expense (interest) 232,000 128,000
Income before income tax $740,000 $556,000
Income tax expense 88,800 66,700
Net income $651,200 $489,300


Blige Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
    Dec. 31, 2016     Dec. 31, 2015
Assets
Current assets
Cash $639,200 $689,560
Temporary investments 967,440 1,142,690
Accounts receivable (net) 678,900 635,100
Inventories 511,000 394,200
Prepaid expenses 120,932 137,910
Total current assets $2,917,472 $2,999,460
Long-term investments 1,768,208 923,289
Property, plant, and equipment (net) 3,770,000 3,393,000
Total assets $8,455,680 $7,315,749
Liabilities
Current liabilities $858,080 $1,613,349
Long-term liabilities
Mortgage note payable, 8%, due 2021 $1,300,000 $0
Bonds payable, 8%, due 2017 1,600,000 1,600,000
Total long-term liabilities $2,900,000 $1,600,000
Total liabilities $3,758,080 $3,213,349
Stockholders' Equity
Preferred $0.7 stock, $50 par $600,000 $600,000
Common stock, $10 par 680,000 680,000
Retained earnings 3,417,600 2,822,400
Total stockholders' equity $4,697,600 $4,102,400
Total liabilities and stockholders' equity $8,455,680 $7,315,749

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.

5. Number of days' sales in receivables fill in the blank days

6. Inventory turnover fill in the blank

7. Number of days' sales in inventory fill in the blank days

8. Ratio of fixed assets to long-term liabilities fill in the blank

Homework Answers

Answer #1

5. Number of days' sales in receivables = 365 / (Net Sales / Avg.Receivables ) = 365 / ( 3876300 / (678900 + 635100 ) / 2 = 365 / ( 3876300 / 657000 ) = 365 / 5.9 = 61.86 Days

6. Inventory turnover = Cost of goods sold / Avg.Inventory = 1403060 / ( 511000 + 394200 ) / 2 = 1403060 / 452600 = 3.1

7. Number of days' sales in inventory = 365 / Inventory turnover = 365 / 3.1 = 117.74 Days

8. Ratio of fixed assets to long-term liabilities = 3770000 / 2900000 = 1.3

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