Question

In: Accounting

Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....

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 $2,822,400 $2,389,100
Add net income for year 651,200 489,300
Total $3,473,600 $2,878,400
Deduct dividends
On preferred stock $8,400 $8,400
On common stock 47,600 47,600
Total $56,000 $56,000
Retained earnings, December 31 $3,417,600 $2,822,400


Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
    2016     2015
Sales $3,895,680 $3,584,000
Sales returns and allowances 19,380 12,600
Sales $3,876,300 $3,571,400
Cost of goods sold 1,403,060 1,290,820
Gross profit $2,473,240 $2,280,580
Selling expenses $836,910 $1,031,700
Administrative expenses 712,930 605,920
Total operating expenses 1,549,840 1,637,620
Income from operations $923,400 $642,960
Other income 48,600 41,040
$972,000 $684,000
Other expense (interest) 232,000 128,000
Income before income tax $740,000 $556,000
Income tax expense 88,800 66,700
Net income $651,200 $489,300


Blige Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
    Dec. 31, 2016     Dec. 31, 2015
Assets
Current assets
Cash $639,200 $689,560
Temporary investments 967,440 1,142,690
Accounts receivable (net) 678,900 635,100
Inventories 511,000 394,200
Prepaid expenses 120,932 137,910
Total current assets $2,917,472 $2,999,460
Long-term investments 1,768,208 923,289
Property, plant, and equipment (net) 3,770,000 3,393,000
Total assets $8,455,680 $7,315,749
Liabilities
Current liabilities $858,080 $1,613,349
Long-term liabilities
Mortgage note payable, 8%, due 2021 $1,300,000 $0
Bonds payable, 8%, due 2017 1,600,000 1,600,000
Total long-term liabilities $2,900,000 $1,600,000
Total liabilities $3,758,080 $3,213,349
Stockholders' Equity
Preferred $0.7 stock, $50 par $600,000 $600,000
Common stock, $10 par 680,000 680,000
Retained earnings 3,417,600 2,822,400
Total stockholders' equity $4,697,600 $4,102,400
Total liabilities and stockholders' equity $8,455,680 $7,315,749

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.

10. Number of times interest charges are earned fill in the blank 10
11. Number of times preferred dividends are earned fill in the blank 11
12. Ratio of sales to assets fill in the blank 12
13. Rate earned on total assets %

Solutions

Expert Solution

10.) Number of times interest charges are earned = EBIT / Interest Expense = 972,000 / 232,000 = 4.19 Times or 4.2

11.) Number of times preferred dividends are earned = Net Income / Preferred Dividends = 651,200 / 8,400 = 77.52 Times or 77.5

12.) Ratio of sales to assets = Net Sales / AverageTotal Assets = 3,876,300 / (8,455,680 + 7,315,749)/2 = 0.49 or 0.5

Note:- We can also take total assets for 2016 instead of average assets, in which case, answer would be = 3,876,300 / 8,455,680 = 0.46 or 0.5

13.) Rate earned on total assets % = EBIT / Average Total Assets * 100= 972,000 / (8,455,680 + 7,315,749)/2 * 100 = 12.33% or 12.3%

Note:- Here also we can take total assets for 2016 instead of average assets, in which case, answer would be = 972,000 / 8,455,680 *100 = 11.5 %

Alternative formulas involving use of Net Income + Interest and other such variants are also used depending on the GAAP and the country of question.

*** Please leave a comment in case of any doubt or query and i will get back to you. ***

Please hit like if this helps!


Related Solutions

Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $54 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 $3,212,400 $2,711,800 Add net income for year 710,000 555,400 Total $3,922,400 $3,267,200 Deduct dividends On preferred stock $11,900 $11,900 On common stock 42,900 42,900 Total $54,800 $54,800 Retained earnings,...
Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $56 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 $1,412,650 $1,198,150 Add net income for year 325,600 245,400 Total $1,738,250 $1,443,550 Deduct dividends On preferred stock $10,500 $10,500 On common stock 20,400 20,400 Total $30,900 $30,900 Retained earnings,...
Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $2,822,400 $2,389,100 Add net income for year 651,200 489,300 Total $3,473,600 $2,878,400 Deduct dividends On preferred stock $8,400 $8,400 On common stock 47,600 47,600 Total $56,000 $56,000 Retained earnings,...
Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $4,800,300 $4,081,000 Add net income for year 1,036,000 835,900 Total $5,836,300 $4,916,900 Deduct dividends On preferred stock $14,000 $14,000 On common stock 102,600 102,600 Total $116,600 $116,600 Retained earnings,...
Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $67 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 $1,928,600 $1,628,300 Add net income for year 456,000 333,500 Total $2,384,600 $1,961,800 Deduct dividends On preferred stock $5,600 $5,600 On common stock 27,600 27,600 Total $33,200 $33,200 Retained earnings,...
Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $59 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 $3,875,800 $3,256,400 Add net income for year 876,000 667,000 Total $4,751,800 $3,923,400 Deduct dividends On preferred stock $11,200 $11,200 On common stock 36,400 36,400 Total $47,600 $47,600 Retained earnings,...
Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $63 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 $913,750 $770,650 Add net income for year 207,200 157,800 Total $1,120,950 $928,450 Deduct dividends On preferred stock $6,300 $6,300 On common stock 8,400 8,400 Total $14,700 $14,700 Retained earnings,...
Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $60 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 $2,832,200 $2,391,600 Add net income for year 624,800 489,800 Total $3,457,000 $2,881,400 Deduct dividends On preferred stock $8,400 $8,400 On common stock 40,800 40,800 Total $49,200 $49,200 Retained earnings,...
Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows....
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 $64 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 $2,464,650 $2,084,550 Add net income for year 577,600 427,000 Total $3,042,250 $2,511,550 Deduct dividends On preferred stock $7,000 $7,000 On common stock 39,900 39,900 Total $46,900 $46,900 Retained earnings,...
Measures of liquidity, Solvency, and Profitability The comparative financial statements of Marshall Inc. are as follows....
Measures of liquidity, Solvency, and Profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 69 on December 31, 20Y2. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1     20Y2     20Y1 Retained earnings, January 1 $3,577,150 $3,023,350 Net income 851,200 619,300 Total $4,428,350 $3,642,650 Dividends: On preferred stock $13,300 $13,300 On common stock 52,200 52,200 Total dividends $65,500 $65,500 Retained earnings, December 31 $4,362,850...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT