Question

help please
Mastery Problem: Financial Statement Analysis Liquidity and Solvency Measures Your friend, another accountant, has bet you that with your knowledge of accounting and just the computations for common analytical measures, you can figure out many aspects of a company's financial statements. You take the bet! Match each computation to one of the liquidity and solvency measures in the table. (Hint: Begin by looking for simple computations and identifying the amounts in those computations. Look for other measures that use those amounts.) Liquidity and Solvency Measures Computations Working capital $3,093,000 - $860,000 Current ratio $3,093,000 - $860,000 Quick ratio $1,866,000 - $860,000 Accounts receivable turnover $8,280,000 = [($714,000 + $ 740,000) = 2] Number of days' sales in receivables [($714,000 + $740,000) = 2] + ($8,280,000 = 365) Inventory turnover $4,100,000 = [($1,072,000+ $1,100,000) = 2] Number of days' sales in inventory [($1,072,000+ $1,100,000) = 2] = ($4,100,000 - 365) Ratio of fixed assets to long-term liabilities $2,690,000 - $1,690,000 Ratio of liabilities to stockholders' equity $2,550,000 - $4,057,000 Times interest earned ($989,400 + $127,000) - $127,000 Feedback Check My Work Look for patterns in the computations and match them to ratios that are related to each other. Identify the amounts in the computations and consider how they are related to amounts in other computations.

Answer 1

Answer is given below

Current Assets- Quick Assets will give Inventory and prepaid expenses

Deduct Inventory from it (Inventory is from Inventory turnover ratio)

Balance Sheet December 31, 20X6 Assets Current Assets Cash $823,000 $329,000 $714,000 $1,072,000 $155,000 Marketable securities |Accounts receivable(Net) Inventory Prepaid expense Total Current Assets $3,093,000 $824,000 Long-term Investments Plant, Property and Equipment (Net) $2,690,000 Total Assets $6,607,000 Liabilities $860,000 $1,690,000 Current Liabilities Long-term Liabilities Total Liabilities $2,550,000 Stockholders' Equity Preferred stock $10 par Common stock $5 par Retained earnings $487,500 $1,250,000 $2,319,500 Total Stockholders Equity $4,057,000 Total Liabilities and Stockholders' Equity $6,607,000 Comparative Income Statement For the years ended December 31, 20Y6 and 20Y5 Increase/(Decrease) Percentage 20Υ6 20YS Amount $8,280,000 -$4,100,000 $4,180,000 -$1,948,600 -$1,242,000 Sales $7,287,000 -$3,444,000 $3,843,000 -$1,457,600| -$1,106,000 -$2,563,600 $1,279,400 -$120,600 $1,158,800 -$181,980 $976,820 $993,000 -$656,000 $337,000 13.6% Cost of Goods sold 19.0% Gross profit Selling expenses Administrative expenses 8.8% -$491,000 -$136,000 -$627,000 -$290,000 -$6,400 -$296,400 $121,000 33.7% 12.3% 24.5% -22.7% -$3,190,600 $989,400 -$127,000 $862,400 -$60,980 $801,420 Total Operating expenses Operating Income Other expense (Interest) Income before income tax 5.3% -25.6% -66.5% -18.0 % Income tax expense Net Income -$175,400