Question

1. Nineteen Measures of The ability of a firm to pay its debts as they come due.Solvency and The ability of a firm to earn income.Profitability

   The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $61 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			$1,943,600		$1,645,700
   Add net income for year			432,000		337,100
   Total			$2,375,600		$1,982,800
   Deduct dividends
   	On preferred stock		$7,000		$7,000
   	On common stock		32,200		32,200
   		Total	$39,200		$39,200
   Retained earnings, December 31			$2,336,400		$1,943,600

   Blige Inc.
   Comparative Income Statement
   For the Years Ended December 31, 2016 and 2015
   	2016		2015
   Sales	$2,575,110		$2,369,100
   Sales returns and allowances	12,810		8,330
   Sales	$2,562,300		$2,360,770
   Cost of goods sold	995,720		916,060
   Gross profit	$1,566,580		$1,444,710
   Selling expenses	$503,840		$626,030
   Administrative expenses	429,190		367,670
   Total operating expenses	933,030		993,700
   Income from operations	$633,550		$451,010
   Other income	33,350		28,790
   	$666,900		$479,800
   Other expense (interest)	176,000		96,800
   Income before income tax	$490,900		$383,000
   Income tax expense	58,900		45,900
   Net income	$432,000		$337,100

   Blige Inc.
   Comparative Balance Sheet
   December 31, 2016 and 2015
   			Dec. 31, 2016		Dec. 31, 2015
   Assets
   Current assets
   	Cash		$535,350		$428,450
   	Temporary investments		810,260		709,990
   	Accounts receivable (net)		489,100		459,900
   	Inventories		365,000		277,400
   	Prepaid expenses		101,274		85,690
   		Total current assets	$2,300,984		$1,961,430
   Long-term investments			912,176		248,553
   Property, plant, and equipment (net)			2,860,000		2,574,000
   Total assets			$6,073,160		$4,783,983
   Liabilities
   Current liabilities			$676,760		$770,383
   Long-term liabilities
   	Mortgage note payable, 8%, due 2021		$990,000		$0
   	Bonds payable, 8%, due 2017		1,210,000		1,210,000
   		Total long-term liabilities	$2,200,000		$1,210,000
   Total liabilities			$2,876,760		$1,980,383
   Stockholders' Equity
   Preferred $0.7 stock, $40 par			$400,000		$400,000
   Common stock, $10 par			460,000		460,000
   Retained earnings			2,336,400		1,943,600
   	Total stockholders' equity		$3,196,400		$2,803,600
   Total liabilities and stockholders' equity			$6,073,160		$4,783,983

   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. The excess of the current assets of a business over its current liabilities.Working capital	$
   2. A financial ratio that is computed by dividing current assets by current liabilities.Current ratio
   3. A financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).Quick ratio
   4. The relationship between sales and accounts receivable, computed by dividing the sales by the average net accounts receivable; measures how frequently during the year the accounts receivable are being converted to cash.Accounts receivable turnover
   5. The relationship between sales and accounts receivable, computed by dividing the average accounts receivable by the average daily sales.Number of days' sales in receivables		days
   6. The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory.Inventory turnover
   7. The relationship between the volume of sales and inventory, computed by dividing average inventory by the average daily cost of goods sold.Number of days' sales in inventory		days
   8. The ratio of fixed assets to long-term liabilities provides a measure of whether note-holders or bondholders will be paid.Ratio of fixed assets to long-term liabilities
   9. The ratio of liabilities to stockholders' equity measures how much of the company is financed by debt and equity.Ratio of liabilities to stockholders' equity
   10. A ratio that measures creditor margin of safety for interest payments, calculated as income before income tax + interest expense divided by interest expense.Number of times interest charges are earned
   11. A ratio that measures the risk that preferred dividends will not be paid if earnings decrease, calculated by dividing net income by the amount of preferred dividends.Number of times preferred dividends are earned
   12. Ratio that measures how effectively a company uses its assets, computed as sales divided by average total assets.Ratio of sales to assets
   13. A measure of profitability of assets, without regard to the portion of assets financed by creditors or stockholders.Rate earned on total assets		%
   14. A measure of profitability computed by dividing net income by average stockholders' equity.Rate earned on stockholders' equity		%
   15. A measure of profitability computed by dividing net income, reduced by preferred dividend requirements, by average common stockholders' equity.Rate earned on common stockholders' equity		%
   16. The profitability ratio of net income available to common shareholders to the number of common shares outstanding.Earnings per share on common stock	$
   17. The ratio of the market price per share of common stock, at a specific date, to the annual earnings per share.Price-earnings ratio
   18. Measures the extent to which earnings are being distributed to common shareholders.Dividends per share of common stock	$
   19. A ratio, computed by dividing the annual dividends paid per share of common stock by the market price per share at a specific date, that indicates the rate of return to stockholders in terms of cash dividend distributions.Dividend yield		%

Answer 1

1. Working Capital = Total Current Assets - Total Current Liabilities

= $2,300,984 - $676,760

= $1,624,224

Therefore, working capital is $1,624,224.

2. Current Ratio = Total Current Assets/Total Current Liabilities

= $2,300,984/$676,760

= 3.4

Therefore, current ratio is 3.4.

3. Quick Ratio = (Cash + Temporary Investments (marketable securities) + Accounts Receivable)/Total Current Liabilities

= ($535,350 + $810,260 + $489,100)/$676,760

= $1,834,710/$676,760

= 2.7

Therefore, quick ratio is 2.7.

4. Accounts Receivable Turnover = Total Sales/Average Accounts Receivable

= $2,575,110/($489,100 + $459,900/2)

= $2,575,110/$474,500

= 5.4

Therefore, accounts receivable turnover ratio is 5.4

Note: As per Chegg guidelines, the first four sub parts are answered. Hence, please post the remaining questions separately to answer.