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 $65 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 |
$4,248,900 |
|
$3,605,400 |
|
| Add net income for year |
937,200 |
|
738,500 |
|
| Total |
$5,186,100 |
|
$4,343,900 |
|
| Deduct dividends |
|
|
|
|
|
On preferred stock |
$12,600 |
|
$12,600 |
|
|
On common stock |
82,400 |
|
82,400 |
|
|
|
Total |
$95,000 |
|
$95,000 |
|
| Retained earnings, December 31 |
$5,091,100 |
|
$4,248,900 |
|
| Blige Inc. |
| Comparative Income Statement |
| For the Years Ended December 31, 2016 and 2015 |
|
2016 |
2015 |
| Sales |
$6,124,875 |
|
$5,634,900 |
|
| Sales returns and allowances |
30,470 |
|
19,810 |
|
| Sales |
$6,094,405 |
|
$5,615,090 |
|
| Cost of goods sold |
1,982,680 |
|
1,824,070 |
|
| Gross profit |
$4,111,725 |
|
$3,791,020 |
|
| Selling expenses |
$1,476,990 |
|
$1,766,410 |
|
| Administrative expenses |
1,258,185 |
|
1,037,420 |
|
| Total operating expenses |
2,735,175 |
|
2,803,830 |
|
| Income from operations |
$1,376,550 |
|
$987,190 |
|
| Other income |
72,450 |
|
63,010 |
|
|
$1,449,000 |
|
$1,050,200 |
|
| Other expense (interest) |
384,000 |
|
211,200 |
|
| Income before income tax |
$1,065,000 |
|
$839,000 |
|
| Income tax expense |
127,800 |
|
100,500 |
|
| Net income |
$937,200 |
|
$738,500 |
|
| Blige Inc. |
| Comparative Balance Sheet |
| December 31, 2016 and 2015 |
|
Dec. 31, 2016 |
Dec. 31, 2015 |
| Assets |
|
| Current assets |
|
|
|
Cash |
$1,107,030 |
|
$847,220 |
|
|
Temporary investments |
1,675,500 |
|
1,403,970 |
|
|
Accounts receivable (net) |
1,065,800 |
|
1,000,100 |
|
|
Inventories |
803,000 |
|
613,200 |
|
|
Prepaid expenses |
209,438 |
|
169,440 |
|
|
|
Total current assets |
$4,860,768 |
|
$4,033,930 |
|
| Long-term investments |
2,719,322 |
|
620,927 |
|
| Property, plant, and equipment (net) |
5,760,000 |
|
5,184,000 |
|
| Total assets |
$13,340,090 |
|
$9,838,857 |
|
| Liabilities |
| Current liabilities |
$1,518,990 |
|
$1,019,957 |
|
| Long-term liabilities |
|
|
|
Mortgage note payable, 8%, due 2021 |
$2,160,000 |
|
$0 |
|
|
Bonds payable, 8%, due 2017 |
2,640,000 |
|
2,640,000 |
|
|
|
Total long-term liabilities |
$4,800,000 |
|
$2,640,000 |
|
| Total liabilities |
$6,318,990 |
|
$3,659,957 |
|
| Stockholders' Equity |
|
|
| Preferred $0.7 stock, $50 par |
$900,000 |
|
$900,000 |
|
| Common stock, $10 par |
1,030,000 |
|
1,030,000 |
|
| Retained earnings |
5,091,100 |
|
4,248,900 |
|
|
Total stockholders' equity |
$7,021,100 |
|
$6,178,900 |
|
| Total liabilities and stockholders' equity |
$13,340,090 |
|
$9,838,857 |
|
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 |
|
% |