Question

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			$3,074,900		$2,593,500
Add net income for year			720,000		531,200
Total			$3,794,900		$3,124,700
Deduct dividends
	On preferred stock		$9,100		$9,100
	On common stock		40,700		40,700
		Total	$49,800		$49,800
Retained earnings, December 31			$3,745,100		$3,074,900

Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
	2016		2015
Sales	$4,620,165		$4,250,600
Sales returns and allowances	22,990		14,940
Sales	$4,597,175		$4,235,660
Cost of goods sold	1,651,260		1,519,160
Gross profit	$2,945,915		$2,716,500
Selling expenses	$994,590		$1,241,430
Administrative expenses	847,235		729,090
Total operating expenses	1,841,825		1,970,520
Income from operations	$1,104,090		$745,980
Other income	58,110		47,620
	$1,162,200		$793,600
Other expense (interest)	344,000		189,600
Income before income tax	$818,200		$604,000
Income tax expense	98,200		72,800
Net income	$720,000		$531,200

Blige Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
			Dec. 31, 2016		Dec. 31, 2015
Assets
Current assets
	Cash		$890,650		$746,260
	Temporary investments		1,348,010		1,236,650
	Accounts receivable (net)		861,400		810,300
	Inventories		642,400		496,400
	Prepaid expenses		168,509		149,250
		Total current assets	$3,910,969		$3,438,860
Long-term investments			1,712,741		304,601
Property, plant, and equipment (net)			5,160,000		4,644,000
Total assets			$10,783,710		$8,387,461
Liabilities
Current liabilities			$1,348,610		$1,552,561
Long-term liabilities
	Mortgage note payable, 8%, due 2021		$1,930,000		$0
	Bonds payable, 8%, due 2017		2,370,000		2,370,000
		Total long-term liabilities	$4,300,000		$2,370,000
Total liabilities			$5,648,610		$3,922,561
Stockholders' Equity
Preferred $0.7 stock, $50 par			$650,000		$650,000
Common stock, $10 par			740,000		740,000
Retained earnings			3,745,100		3,074,900
	Total stockholders' equity		$5,135,100		$4,464,900
Total liabilities and stockholders' equity			$10,783,710		$8,387,461

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		%

Answer 1

Answer of Part 1:

Working Capital = Current Assets – Current Liabilities
Working Capital = $3,910,969 - $1,348,610
Working Capital = $2,562,359

Answer of Part 2:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $3,910,969 / $1,348,610
Current Ratio = 2.9:1

Answer of Part 3:

Quick Ratio = (Current Assets – Inventory – Prepaid Expenses) /Current Liabilities
Quick Ratio = ($3,910,969 - $642,400 - $168,509) / $1,348,610
Quick Ratio = $3,100,060 / $1,348,610
Quick Ratio = 2.3:1

Answer of Part 4:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable)/2
Average Accounts Receivable = ($810,300 + $861,400) /2
Average Accounts Receivable = $835,850

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $4,597,175 / $835,850
Accounts Receivable Turnover = 5.5 times

Answer of Part 5:

Number of Days Sales in Receivable = 365 days / Accounts Receivable Turnover
Number of Days Sales in Receivable = 365 / 5.5
Number of Days Sales in Receivable = 66.4 days