Question

In: Accounting

Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are...

Twenty metrics of liquidity, Solvency, and Profitability

The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $119.70 on December 31, 20Y8.

AUTOMOTIVE SOLUTIONS INC.
Comparative Income Statement
For the Years Ended December 31, 20Y8 and 20Y7
    20Y8     20Y7
Sales $10,000,000 $ 9,400,000
Cost of goods sold (5,350,000) (4,950,000)
Gross profit $ 4,650,000 $ 4,450,000
Selling expenses $ (2,000,000) $(1,880,000)
Administrative expenses (1,500,000) (1,410,000)
Total operating expenses $ (3,500,000) $(3,290,000)
Operating income $ 1,150,000 $ 1,160,000
Other revenue and expense:
    Other revenue 150,000 140,000
    Other expense (interest) (170,000) (150,000)
Income before income tax $ 1,130,000 $ 1,150,000
Income tax expense (230,000) (225,000)
Net income $ 900,000 $ 925,000
AUTOMOTIVE SOLUTIONS INC.
Comparative Statement of Stockholders’ Equity
For the Years Ended December 31, 20Y8 and 20Y7
20Y8 20Y7
Preferred
Stock
Common
Stock
Retained
Earnings
Preferred
Stock
Common
Stock
Retained
Earnings
Balances, Jan. 1 $500,000 $500,000 $5,375,000 $500,000 $500,000 $4,545,000
Net income 900,000 925,000
Dividends:
    Preferred stock (45,000) (45,000)
    Common stock (50,000) (50,000)
Balances, Dec. 31 $500,000 $500,000 $6,180,000 $500,000 $500,000 $5,375,000
AUTOMOTIVE SOLUTIONS INC.
Comparative Balance Sheet
December 31, 20Y8 and 20Y7
    Dec. 31, 20Y8     Dec. 31, 20Y7
Assets
Current assets:
    Cash $ 500,000 $ 400,000
    Marketable securities 1,010,000 1,000,000
    Accounts receivable (net) 740,000 510,000
    Inventories 1,190,000 950,000
    Prepaid expenses 250,000 229,000
        Total current assets $3,690,000 $3,089,000
Long-term investments 2,350,000 2,300,000
Property, plant, and equipment (net) 3,740,000 3,366,000
Total assets $9,780,000 $8,755,000
Liabilities
Current liabilities $ 900,000 $ 880,000
Long-term liabilities:
    Mortgage note payable, 10% $ 200,000 $ 0
    Bonds payable, 10% 1,500,000 1,500,000
        Total long-term liabilities $1,700,000 $1,500,000
Total liabilities $2,600,000 $2,380,000
Stockholders' Equity
Preferred $0.90 stock, $10 par $ 500,000 $ 500,000
Common stock, $5 par 500,000 500,000
Retained earnings 6,180,000 5,375,500
Total stockholders' equity $7,180,000 $6,375,000
Total liabilities and stockholders' equity $9,780,000 $8,755,000

Instructions:

Determine the following measures for 20Y8.

Round ratio values to one decimal place and dollar amounts to the nearest cent. For number of days' sales in receivables and number of days' sales in inventory, round intermediate calculations to the nearest whole dollar and final amounts to one decimal place. Assume there are 365 days in the year.

1. Working capital $__2,790,000_______
2. Current ratio ___4.1_______
3. Quick ratio ____2.5______
4. Accounts receivable turnover __________
5. Days' sales in receivables __________ days
6. Inventory turnover __________
7. Days' sales in inventory __________ days
8. Debt ratio __________ %
9. Ratio of liabilities to stockholders' equity __________
10. Ratio of fixed assets to long-term liabilities __________
11. Times interest earned __________ times
12. Times preferred dividends earned ____20______ times
13. Asset turnover __________
14. Return on total assets __________ %
15. Return on stockholders’ equity __________ %
16. Return on common stockholders’ equity __________ %
17. Earnings per share on common stock $__8.55_______
18. Price-earnings ratio __________
19. Dividends per share of common stock $__0.5_______
20. Dividend yield ___________ %

Solutions

Expert Solution

Answer of Part 4:

Average Accounts Receivable = (Beginning Account Receivable + Ending Accounts Receivable) /2
Average Accounts Receivable = ($510,000 + $740,000) /2
Average Accounts Receivable = $625,000

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $10,000,000 / $625,000
Accounts Receivable Turnover = 16 times

Answer of Part 5:

Days Sales in Receivable = 365 days / Accounts Receivable Turnover
Days Sales in Receivable = 365 / 16
Days Sales in Receivable = 22.8 days

Answer of Part 6:

Average Inventory = (Beginning Inventory + Ending Inventory) /2
Average Inventory = ($950,000 + $1,190,000) /2
Average Inventory = $1,070,000

Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $5,350,000 / $1,070,000
Inventory Turnover = 5 times

Answer of Part 7:

Days Sales in Inventory = 365 days / Inventory Turnover
Days Sales in Inventory = 365 / 5
Days Sales in Inventory = 73 days

Answer of Part 8:

Debt Ratio = Total Liabilities / Total Assets
Debt Ratio = $2,600,000 / $9,780,000
Debt Ratio = 0.3


Related Solutions

Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $56 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7 20Y8 20Y7 Sales $4,234,000 $3,901,040 Cost of goods sold (1,511,100) (1,390,210) Gross profit $2,722,900 $2,510,830 Selling expenses $(975,730) $(1,167,160) Administrative expenses (831,180) (685,480) Total operating expenses (1,806,910) (1,852,640) Operating income $915,990 $658,190...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $56 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7     20Y8     20Y7 Sales $4,234,000 $3,901,040 Cost of goods sold (1,511,100) (1,390,210) Gross profit $2,722,900 $2,510,830 Selling expenses $(975,730) $(1,167,160) Administrative expenses (831,180) (685,480) Total operating expenses (1,806,910) (1,852,640) Operating income $915,990 $658,190...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $68 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7     20Y8     20Y7 Sales $6,456,850 $5,949,020 Cost of goods sold (2,277,600) (2,095,390) Gross profit $4,179,250 $3,853,630 Selling expenses $(1,478,160) $(1,794,610) Administrative expenses (1,259,180) (1,053,970) Total operating expenses (2,737,340) (2,848,580) Operating income $1,441,910 $1,005,050...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $68 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7     20Y8     20Y7 Sales $6,456,850 $5,949,020 Cost of goods sold (2,277,600) (2,095,390) Gross profit $4,179,250 $3,853,630 Selling expenses $(1,478,160) $(1,794,610) Administrative expenses (1,259,180) (1,053,970) Total operating expenses (2,737,340) (2,848,580) Operating income $1,441,910 $1,005,050...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $119.70 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7     20Y8     20Y7 Sales $10,000,000 $ 9,400,000 Cost of goods sold (5,350,000) (4,950,000) Gross profit $ 4,650,000 $ 4,450,000 Selling expenses $ (2,000,000) $(1,880,000) Administrative expenses (1,500,000) (1,410,000) Total operating expenses $ (3,500,000)...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $64 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7     20Y8     20Y7 Sales $3,048,480 $2,808,690 Cost of goods sold (1,095,000) (1,007,400) Gross profit $1,953,480 $1,801,290 Selling expenses $(702,710) $(838,590) Administrative expenses (598,600) (492,510) Total operating expenses (1,301,310) (1,331,100) Operating income $652,170 $470,190...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are...
Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $66 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7     20Y8     20Y7 Sales $5,409,300 $4,983,820 Cost of goods sold (2,124,300) (1,954,360) Gross profit $3,285,000 $3,029,460 Selling expenses $(1,001,580) $(1,264,600) Administrative expenses (853,200) (742,700) Total operating expenses (1,854,780) (2,007,300) Operating income $1,430,220 $1,022,160...
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...
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 Inc. common stock was $ 66 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 $ 1,413,000 $ 1,202,700 Net income 330,000 246,300 Total $ 1,671,000 $ 1,449,000 Dividends On preferred stock $ 10,500 $ 10,500 On common stock 25,500 25,500 Total dividends...
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 $ 65 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 $3,356,900 $2,820,900 Net income 728,000 577,800 Total $4,084,900 $3,398,700 Dividends: On preferred stock $9,800 $9,800 On common stock 32,000 32,000 Total dividends $41,800 $41,800 Retained earnings, December 31 $4,043,100...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT