Question

Calculator 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 $55 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 $1,662,500 $1,403,900 Add net income for year 364,000 287,600 $1,691,500 Total $2,026,500 Deduct dividends On preferred stock $12,600 $12,600 16,400 On common stock 16,400 Total $29,000 $29,000 $1,662,500 Retained earnings, December 31 $1,997,500

Answer 1

Answer of Part 1:

Working Capital = Current Assets – Current Liabilities
Working Capital = $1,831,325 - $590,750
Working Capital = $1,240,575

Answer of Part 2:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $1,831,325 / $590,750
Current Ratio = 3.1:1

Answer of Part 3:

Quick Ratio = (Current Assets – Inventory – Prepaid Expense) / Current Liabilities
Quick Ratio = ($1,831,325 - $321,200 - $76,065) / $590,750
Quick Ratio = $1,434,060 / $590,750
Quick Ratio = 2.4:1

Answer of Part 4:

Average Accounts Receivable = (Beginning Account Receivable + Ending Accounts Receivable)/2
Average Accounts Receivable = ($401,500 + $423,400) /2
Average Accounts Receivable = $412,450

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $2,309,720 / $412,450
Accounts Receivable Turnover = 5.6 times

Answer of Part5:

Number of Days Sales in Receivable = 365 days / Accounts Receivable Turnover
Number of Days Sales in Receivable = 365 / 5.6
Number of Days Sales in Receivable = 65.2 days