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Financial statements for Baird Company follow. BAIRD COMPANY Balance Sheets As of December 31 2019 2018...

Financial statements for Baird Company follow.

BAIRD COMPANY
Balance Sheets
As of December 31
2019 2018
Assets
Current assets
Cash $ 17,000 $ 13,000
Marketable securities 20,200 6,200
Accounts receivable (net) 43,000 35,000
Inventories 128,000 136,000
Prepaid items 27,000 12,000
Total current assets 235,200 202,200
Investments 32,000 25,000
Plant (net) 265,000 250,000
Land 28,000 23,000
Total assets $ 560,200 $ 500,200
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities
Notes payable $ 18,800 $ 12,500
Accounts payable 113,800 100,000
Salaries payable 23,000 17,000
Total current liabilities 155,600 129,500
Noncurrent liabilities
Bonds payable 120,000 120,000
Other 26,000 21,000
Total noncurrent liabilities 146,000 141,000
Total liabilities 301,600 270,500
Stockholders’ equity
Preferred stock, (par value $10, 4% cumulative, non-participating; 7,000 shares authorized and issued) 70,000 70,000
Common stock (no par; 50,000 shares authorized; 10,000 shares issued) 70,000 70,000
Retained earnings 118,600 89,700
Total stockholders’ equity 258,600 229,700
Total liabilities and stockholders’ equity $ 560,200 $ 500,200
BAIRD COMPANY
Statements of Income and Retained Earnings
For the Years Ended December 31
2019 2018
Revenues
Sales (net) $ 250,000 $ 230,000
Other revenues 8,400 5,400
Total revenues 258,400 235,400
Expenses
Cost of goods sold 125,000 109,000
Selling, general, and administrative 57,000 52,000
Interest expense 8,600 7,800
Income tax expense 33,000 32,000
Total expenses 223,600 200,800
Net earnings (net income) 34,800 34,600
Retained earnings, January 1 89,700 61,000
Less: Preferred stock dividends 2,800 2,800
Common stock dividends 3,100 3,100
Retained earnings, December 31 $ 118,600 $ 89,700

Required

Calculate the following ratios for 2019 and 2018. Since 2017 numbers are not presented, do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.

  1. Working capital.
  2. Current ratio. (Round your answers to 2 decimal places.)
  3. Quick ratio. (Round your answers to 2 decimal places.)
  4. Receivables turnover (beginning receivables at January 1, 2018, were $36,000). (Round your answers to 2 decimal places.)
  5. Average days to collect accounts receivable. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)
  6. Inventory turnover (beginning inventory at January 1, 2018, was $142,000). (Round your answers to 2 decimal places.)
  7. Number of days to sell inventory. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)
  8. Debt to assets ratio. (Round your answers to the nearest whole percent.)
  9. Debt to equity ratio. (Round your answers to 2 decimal places.)
  10. Number of times interest was earned. (Round your answers to 2 decimal places.)
  11. Plant assets to long-term debt. (Round your answers to 2 decimal places.)
  12. Net margin. (Round your answers to 2 decimal places.)
  13. Turnover of assets. (Round your answers to 2 decimal places.)
  14. Return on investment. (Round your answers to 2 decimal places.)
  15. Return on equity. (Round your answers to 2 decimal places.)
  16. Earnings per share. (Round your answers to 2 decimal places.)
  17. Book value per share of common stock. (Round your answers to 2 decimal places.)
  18. Price-earnings ratio (market price per share: 2018, $11.85; 2019, $12.70). (Round your intermediate calculations and final answer to 2 decimal places.)
  19. Dividend yield on common stock. (Round your answers to 2 decimal places.)
2019 2018
a. Working capital
b. Current ratio
c. Quick ratio
d. Receivables turnover times times
e. Average days to collect accounts receivable days days
f. Inventory turnover times times
g. Average days to sell inventory days days
h. Debt to assets ratio % %
i. Debt to equity ratio
j. Number of times interest earned times times
k. Plant assets to long-term debt
l. Net margin % %
m. Asset turnover
n. Return on investment % %
o. Return on equity % %
p. Earnings per share per share per share
q. Book value per share per share per share
r. Price-earnings ratio
s. Dividend yield % %

Solutions

Expert Solution

a. Working capital = Current Assets - Current Liabilities

2019 = 235,200 - 155,600 = 79600

2018 = 202,200 - 129,500 = 72700

b. Current ratio = Current Assets / Current Liabilities

2019 = 235,200 / 155,600 = 1.51

2018 = 202,200 / 129,500 = 1.56

c. Quick ratio = Quick Assets / Current Liabilities

2019 = (17000 + 20200 + 43000 ) / 155,600 = 0.52

2018 = (13000 + 6200 + 35000 ) / 129,500 = 0.42

d. Receivables turnover = Sales / Avg. Receivables

2019 = 250000 / (43000 + 35000) / 2 = 250000 / 39000 = 6.41

2018 = 230000 / ( 35000 + 36000 ) / 2 = 230000 / 35500 = 6.48

e, Average days to collect accounts receivable = 365 / Receivables turnover

2019 = 365 / 6.41 = 56.94 Days

2018 = 365 / 6.48 = 56.33 Days

f. Inventory turnover = Cost of Goods sold / Avg. Inventory

2019 = 125000 / (128000 + 136000) / 2 = 125000 / 132000 = 0.95

2018 = 109000 / ( 136000 + 142000 ) / 2 = 109000 / 139000 = 0.784

g. Average days to sell inventory = 365/ Inventory turnover

2019 = 365/ 0.95 = 384 Days

2018 = 365/ 0.784 = 465 Days

h. Debt to assets ratio = Total Liabilities / Total Assets

2019 = 301600 / 560200 = 0.54

2018 = 270500 / 500200 = 0.54

i. Debt to equity ratio = Total Liabilities / Total Equity

2019 = 301600 / 258600 = 1.17

2018 = 270500 / 229700 = 1.18

j. Number of times interest earned = EBIT / Interest Expense

2019 = ( 258400 - 125000 - 57000 ) / 8600 = 76400 / 8600 = 8.88

2018 = ( 235400 - 109000 - 52000 ) / 7800 = 74400 / 7800 = 9.54

k. Plant assets to long-term debt =

2019 = 265000 / 146000 = 1.82

2018 = 250000 / 141000 = 1.77

l. Net margin = Net Income / Sales

2019 = 34800 / 250000 = 13.92%

2018 = 34600 / 230000 = 15.04%

m. Asset turnover = Sales / Avg. Total Assets

2019 = 250000 / 560200 = 0.45

2018 = 230000 / 500200 = 0.46

n. Return on investment = Net Income / (Long Term Liabilities + Stockholders Equity

2019 = 34800 / ( 146000 + 258600 ) = 34800 / 404600 = 8.6%

2018 = 34600 / ( 141000 + 229700 ) = 34600 / 370700 = 9.33%

o. Return on equity = Net Income / Total Equity

2019 = 34800 / 258600 = 13.46%

2018 = 34600 / 229700 = 15.06%

p. Earnings per share = Net income - preferred dividends / Outstanding shares

2019 = ( 34800 - 2800 ) / 10000 = $3.2

2018 = ( 34600 - 2800 ) / 10000 = $3.18

q. Book value per share = Common Stockholders Equity / Outstanding shares

2019 = (70000 + 118600 ) / 10000 = $18.86

2018 = ( 70000 + 89700 ) / 10000 = $15.97

r. Price-earnings ratio = Market Price per share / EPS

2019 = 12.70 / 3.2 = 3.97

2018 = 11.85 / 3.18 = 3.73

s. Dividend yield = Dividend per share / Market Price per share

2019 = (3100 / 10000 ) / 12.70 = 2.44%

2018 = (3100 / 10000 ) / 11.85 = 2.62%

ekkarill92 answered 1 year ago
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