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   Measures of liquidity, Solvency and Profitability

   The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel common stock was $119.70 on December 31, 20Y2.

   Stargel Inc.
   Comparative Retained Earnings Statement
   For the Years Ended December 31, 20Y2 and 20Y1
   			20Y2		20Y1
   Retained earnings, January 1			$5,375,000		$4,545,000
   Net income			$900,000		$925,000
   Dividends:
   	On preferred stock		(45,000)		(45,000)
   	On common stock		(50,000)		(50,000)
   Increase in retained earnings			$805,000		$830,000
   Retained earnings, December 31			$6,180,000		$5,375,000

   Stargel Inc.
   Comparative Income Statement
   For the Years Ended December 31, 20Y2 and 20Y1
   	20Y2		20Y1
   Sales	$10,000,000		$9,400,000
   Cost of goods sold	(5,350,000)		(4,950,000)
   Gross profit	$4,650,000		$4,450,000
   Selling expenses	$(2,000,000)		$(1,880,000)
   Administrative expenses	(1,500,000)		(1,410,000)
   Total operating expenses	$(3,500,000)		$(3,290,000)
   Operating income	$1,150,000		$1,160,000
   Other revenue and expense:
   Other revenue	150,000		140,000
   Other expense (interest)	(170,000)		(150,000)
   Income before income tax expense	$1,130,000		$1,150,000
   Income tax expense	(230,000)		(225,000)
   Net income	$900,000		$925,000

   Stargel Inc.
   Comparative Balance Sheet
   December 31, 20Y2 and 20Y1
   			20Y2		20Y1
   Assets
   Current assets:
   	Cash		$500,000		$400,000
   	Marketable securities		1,010,000		1,000,000
   	Accounts receivable (net)		740,000		510,000
   	Inventories		1,190,000		950,000
   	Prepaid expenses		250,000		229,000
   		Total current assets	$3,690,000		$3,089,000
   Long-term investments			2,350,000		2,300,000
   Property, plant, and equipment (net)			3,740,000		3,366,000
   Total assets			$9,780,000		$8,755,000
   Liabilities
   Current liabilities			$900,000		$880,000
   Long-term liabilities:
   	Mortgage note payable, 10%		$200,000		$0
   	Bonds payable, 10%		1,500,000		1,500,000
   		Total long-term liabilities	$1,700,000		$1,500,000
   Total liabilities			$2,600,000		$2,380,000
   Stockholders' Equity
   Preferred $0.90 stock, $10 par			$500,000		$500,000
   Common stock, $5 par			500,000		500,000
   Retained earnings			6,180,000		5,375,000
   	Total stockholders' equity		$7,180,000		$6,375,000
   Total liabilities and stockholders' equity			$9,780,000		$8,755,000

   Required:

   Determine the following measures for 20Y2, rounding to one decimal place, except 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. Looking for questions 11 through 18

   1. Working capital	$	279000
   2. Current ratio		4.1
   3. Quick ratio		2.5 or 2.7
   4. Accounts receivable turnover		16
   5. Number of days' sales in receivables		22.8days
   6. Inventory turnover		5
   7. Number of days' sales in inventory		73days
   8. Ratio of fixed assets to long-term liabilities		2.2
   9. Ratio of liabilities to stockholders' equity		.36
   10. Times interest earned		7.6
   11. Asset turnover
   12. Return on total assets		%
   13. Return on stockholders’ equity		%
   14. Return on common stockholders’ equity		%
   15. Earnings per share on common stock	$
   16. Price-earnings ratio
   17. Dividends per share of common stock	$
   18. Dividend yield		%

Answer 1

Please find below table useful to compute desired results: -

A 1 Particulars 2 Asset turnover 3 Return on total assets 4 Return on stockholders' equity 5 Return on common stockholders' equity 6 Earnings per share on common stock 7 Price-earnings ratio 8 Dividends per share of common stock 9 Dividend yield B Formula Sales/Average total Assets Net Income Average total Assets Net Income Average Stockholders' Equity (Net Income - Preferred Dividends) Average Common Stockholders' Equity (Net Income - Preferred Dividends) Average Common Shares Outstanding Market Value per Share/ Earnings Per Share Common Dividends/Number of common Shares outstanding Annual Dividend Share Price =10000000/((9780000+8755000)/2) =900000/((9780000+8755000)/2) =900000/((7180000+6375000)/2) =(900000-45000)/((7180000+6375000)/2) =(900000-45000)/100000 =119.7/C6 =50000/100000 =C8/119.7

End results would be as follows: -

1 Particulars 2 Asset turnover 3 Return on total assets 4 Return on stockholders' equity 5 Return on common stockholders' equity 6 Earnings per share on common stock 7 Price-earnings ratio 8 Dividends per share of common stock 9 Dividend yield Formula Sales/Average total Assets Net Income Average total Assets Net Income Average Stockholders' Equity (Net Income - Preferred Dividends) Average Common Stockholders' Equity (Net Income - Preferred Dividends) Average Common Shares Outstanding Market Value per Share/ Earnings Per Share Common Dividends/Number of common Shares outstanding Annual Dividend Share Price 1.08 9.71% 13.28% 12.62% 8.55 14.00 0.50 0.42%