Question

Assets
Current assets
Cash	$	21,000			$	17,000
Marketable securities		21,000				7,000
Accounts receivable (net)		51,000				43,000
Inventories		136,000				144,000
Prepaid items		25,000				10,000
Total current assets		254,000				221,000
Investments		22,000				15,000
Plant (net)		260,000				245,000
Land		28,000				23,000
Total assets	$	564,000			$	504,000
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities
Notes payable	$	24,600			$	8,300
Accounts payable		58,800				45,000
Salaries payable		25,000				19,000
Total current liabilities		108,400				72,300
Noncurrent liabilities
Bonds payable		140,000				140,000
Other		25,000				20,000
Total noncurrent liabilities		165,000				160,000
Total liabilities		273,400				232,300
Stockholders’ equity
Preferred stock, (par value $10, 4% cumulative, non-participating; 8,000 shares authorized and issued)		80,000				80,000
Common stock (no par; 50,000 shares authorized; 10,000 shares issued)		80,000				80,000
Retained earnings		130,600				111,700
Total stockholders’ equity		290,600				271,700
Total liabilities and stockholders’ equity	$	564,000			$	504,000

MUNOZ COMPANY
Statements of Income and Retained Earnings For the Years Ended December 31
	2019				2018
Revenues
Sales (net)	$	330,000			$	310,000
Other revenues		10,000				7,000
Total revenues		340,000				317,000
Expenses
Cost of goods sold		165,000				133,000
Selling, general, and administrative		65,000				60,000
Interest expense		11,000				10,200
Income tax expense		73,000				72,000
Total expenses		314,000				275,200
Net earnings (net income)		26,000				41,800
Retained earnings, January 1		111,700				77,000
Less: Preferred stock dividends		3,200				3,200
Common stock dividends		3,900				3,900
Retained earnings, December 31	$	130,600			$	111,700

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.

Working capital.

Current ratio. (Round your answers to 2 decimal places.)

Quick ratio. (Round your answers to 2 decimal places.)

Receivables turnover (beginning receivables at January 1, 2018, were $44,000). (Round your answers to 2 decimal places.)

Average days to collect accounts receivable. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)

Inventory turnover (beginning inventory at January 1, 2018, was $150,000). (Round your answers to 2 decimal places.)

Number of days to sell inventory. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)

Debt to assets ratio. (Round your answers to the nearest whole percent.)

Debt to equity ratio. (Round your answers to 2 decimal places.)

Number of times interest was earned. (Round your answers to 2 decimal places.)

Plant assets to long-term debt. (Round your answers to 2 decimal places.)

Net margin. (Round your answers to 2 decimal places.)

Turnover of assets. (Round your answers to 2 decimal places.)

Return on investment. (Round your answers to 2 decimal places.)

Return on equity. (Round your answers to 2 decimal places.)

Earnings per share. (Round your answers to 2 decimal places.)

Book value per share of common stock. (Round your answers to 2 decimal places.)

Price-earnings ratio (market price per share: 2018, $12.25; 2019, $13.50). (Round your intermediate calculations and final answer to 2 decimal places.)

Dividend yield on common stock. (Round your answers to 2 decimal places.)

Answer 1

Answer of Part a:

For 2019:

Working Capital = Current Assets – Current Liabilities
Working Capital = $254,000 - $108,400
Working Capital = $145,600

For 2018:

Working Capital = Current Assets – Current Liabilities
Working Capital = $221,000 - $72,300
Working Capital = $148,700

Answer of Part b:

For 2019:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $254,000 / $108,400
Current Ratio = 2.34

For 2018:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $221,000 / $72,300
Current Ratio = 3.06

Answer of Part c:

For 2019:

Quick Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current Liabilities
Quick Ratio = ($254,000 - $136,000 - $25,000) / $108,400
Quick Ratio = $93,000 / $108,400
Quick Ratio = 0.86

For 2018:

Quick Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current Liabilities
Quick Ratio = ($221,000 - $144,000 - $10,000) / $72,300
Quick Ratio = $67,000 / $72,300
Quick Ratio = 0.93

Answer of Part d:

For 2019:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) /2
Average Accounts Receivable = ($43,000 + $51,000) /2
Average Accounts Receivable = $47,000

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $330,000 / $47,000
Accounts Receivable Turnover = 7.02 times

For 2018:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) /2
Average Accounts Receivable = ($44,000 + $43,000) /2
Average Accounts Receivable = $43,500

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $310,000 / $43,500
Accounts Receivable Turnover = 7.13 times

Answer of Part e:

For 2019:

Average Days to Collect Accounts Receivable = 365 days / Accounts Receivable Turnover
Average Days to Collect Accounts Receivable = 365 / 7.02
Average Days to Collect Accounts Receivable = 52 days

For 2018:

Average Days to Collect Accounts Receivable = 365 days / Accounts Receivable Turnover
Average Days to Collect Accounts Receivable = 365 / 7.13
Average Days to Collect Accounts Receivable = 51 days