Question

Twenty metrics of liquidity, Solvency, and Profitability

The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $60 on December 31, 20Y8.

AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7
	20Y8		20Y7
Sales	$4,091,650		$3,769,800
Cost of goods sold	(1,470,950)		(1,353,270)
Gross profit	$2,620,700		$2,416,530
Selling expenses	$(919,620)		$(1,109,770)
Administrative expenses	(783,380)		(651,770)
Total operating expenses	(1,703,000)		(1,761,540)
Operating income	$917,700		$654,990
Other revenue and expense:
Other income	48,300		41,810
Other expense (interest)	(256,000)		(140,800)
Income before income tax	$710,000		$556,000
Income tax expense	(85,200)		(66,500)
Net income	$624,800		$489,500

AUTOMOTIVE SOLUTIONS INC. Comparative Statement of Stockholders’ Equity For the Years Ended December 31, 20Y8 and 20Y7
	20Y8									20Y7
	Preferred Stock			Common Stock			Retained Earnings			Preferred Stock			Common Stock			Retained Earnings
Balances, Jan. 1		$600,000			$680,000			$2,831,550			$600,000			$680,000			$2,389,950
Net income								624,800									489,500
Dividends:
Preferred stock								(10,500)									(10,500)
Common stock								(37,400)									(37,400)
Balances, Dec. 31		$600,000			$680,000			$3,408,450			$600,000			$680,000			$2,831,550

AUTOMOTIVE SOLUTIONS INC. Comparative Balance Sheet December 31, 20Y8 and 20Y7
	Dec. 31, 20Y8		Dec. 31, 20Y7
Assets
Current assets:
Cash	$742,640		$620,940
Temporary investments	1,124,000		1,028,980
Accounts receivable (net)	715,400		671,600
Inventories	540,200		408,800
Prepaid expenses	140,496		124,190
Total current assets	$3,262,736		$2,854,510
Long-term investments	2,125,319		939,705
Property, plant, and equipment (net)	3,520,000		3,168,000
Total assets	$8,908,055		$6,962,215
Liabilities
Current liabilities	$1,019,605		$1,090,665
Long-term liabilities:
Mortgage note payable, 8%, due in 15 years	$1,440,000		$0
Bonds payable, 8%, due in 20 years	1,760,000		1,760,000
Total long-term liabilities	$3,200,000		$1,760,000
Total liabilities	$4,219,605		$2,850,665
Stockholders' Equity
Preferred $0.70 stock, $40 par	$600,000		$600,000
Common stock, $10 par	680,000		680,000
Retained earnings	3,408,450		2,831,550
Total stockholders' equity	$4,688,450		$4,111,550
Total liabilities and stockholders' equity	$8,908,055		$6,962,215

Instructions:

Determine the following measures for 20Y8. Round ratio values to one decimal place and dollar amounts to the nearest cent. For number of days' sales in receivables and number of days' sales in inventory, round intermediate calculations to the nearest whole dollar and final amounts to one decimal place. Assume there are 365 days in the year.

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

Answer 1

I woorking capital = current assets current liabilitie = $3,262, 736 - $1,019, 605 = 2,243,13) current assels liabilities 12 current ratio = cusent $3,262,736 3 .2 $1,019,605 investments 3) Quick seatio - Cash Cashe asuivalents of short term + current receivable, cunnent liabilities Cash = $ 742.640 $ 1,124,000 Temperory investment $ 715 400 accounts receivables $2,582,040 total $2,582,040 = ratio 2.5 .: Quick $1019, 605

4) Accounts receivable turnoves - Sales average accounts receivable $4,091,650 8715400+ $671,600/ = $4,091,650 -- 5.9 $693,500 365 des in seceivables = account Siecavallo fuinove ratio 365 5.9 -61-86 6) Inventory fuar over a - 6? days clandes olley cost of goods sold average inventory $1,470,950 = $540,200+ 408,800 = $1,470,950 474,500 = 3 .1

7) Days Sales in inventory = inventory (ending 365 cost of goods sold $540, 200 x 365 $1,470,950 = 134 days 8) debt ratio - Total liabilities Total assets $4,219, 605 = 0.47 (0%) 47% $ 8,908, 055 a) Ratio of liabilities to stock holders earuity Total liability shock holders Carcely $4,219,605 - = 0.9 $4,688, 450 (os) 904 10) Ratio of = fixed assets to long team liabilities fixed assets (property, plant o caruipment) long team liabilities = $3,520,000 $3,200,000 lol (OSW 110

Times interest earned - EBIT Creme interest expense other income income = operating interest expense $917,700 + $ 48300 256 000 = 3.77 times - 12) Times prefersed dividend earned Net in come (after tax) prefered divident $624,800 $10500 = 59.50 Con Go times 13) asset tuanoren. Net sales revenue average total asete • $ 4,091,650 $ 8,908, 055 + $ 6,962,215) $4,091,650 $5,526,932 - 7 0.74

14) Return on total assets EBIT average total assets opegating income + othee income total assets average $ 917,700 + 48300 8,903, 055 +6,962,215/2 966000 17.487 5,326,933 15) return on stock holdeas earuity Net in come Total stock holder cauity $ 624,800 - $4, 688,450 = 1333% 16) return on common stock holders sacesty Net income - preferred dividend average common stock $ 624,800 - 10500 $6 80000 + $ 680000) 614300 - = 0.9 (0) 90% 680000

on common stock 17) Earnings pea share dividend preferred - Net in come - outstanding Number of common stock 624BOO - 10500 68000 shares - 614300 $9003 68000 market price 18) price earning ratio= Eps $9.03 - 6.64 19) dividend per share on Common stock - Common stock dividend Number of shall, = $ 37400 $ 68000 shares - $0.55 20) Dividend yield - Dividend per share market price per shop - $0.55 – 0.92%. $ 60