Nineteen Measures of The ability of a firm to pay its debts as they come due.Solvency and The ability of a firm to earn income.Profitability
The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $71 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 | $2,474,150 | $2,101,950 | ||||
| Add net income for year | 570,000 | 430,500 | ||||
| Total | $3,044,150 | $2,532,450 | ||||
| Deduct dividends | ||||||
| On preferred stock | $7,000 | $7,000 | ||||
| On common stock | 51,300 | 51,300 | ||||
| Total | $58,300 | $58,300 | ||||
| Retained earnings, December 31 | $2,985,850 | $2,474,150 | ||||
| Blige Inc. | ||||
| Comparative Income Statement | ||||
| For the Years Ended December 31, 2016 and 2015 | ||||
| 2016 | 2015 | |||
| Sales | $3,288,585 | $3,025,500 | ||
| Sales returns and allowances | 16,360 | 10,630 | ||
| Sales | $3,272,225 | $3,014,870 | ||
| Cost of goods sold | 1,165,080 | 1,071,870 | ||
| Gross profit | $2,107,145 | $1,943,000 | ||
| Selling expenses | $690,680 | $861,540 | ||
| Administrative expenses | 588,355 | 505,990 | ||
| Total operating expenses | 1,279,035 | 1,367,530 | ||
| Income from operations | $828,110 | $575,470 | ||
| Other income | 43,590 | 36,730 | ||
| $871,700 | $612,200 | |||
| Other expense (interest) | 224,000 | 123,200 | ||
| Income before income tax | $647,700 | $489,000 | ||
| Income tax expense | 77,700 | 58,500 | ||
| Net income | $570,000 | $430,500 | ||
| Blige Inc. | |||||||
| Comparative Balance Sheet | |||||||
| December 31, 2016 and 2015 | |||||||
| Dec. 31, 2016 | Dec. 31, 2015 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash | $638,430 | $599,200 | |||||
| Temporary investments | 966,270 | 992,970 | |||||
| Accounts receivable (net) | 613,200 | 576,700 | |||||
| Inventories | 467,200 | 365,000 | |||||
| Prepaid expenses | 120,775 | 119,840 | |||||
| Total current assets | $2,805,875 | $2,653,710 | |||||
| Long-term investments | 1,820,240 | 1,046,746 | |||||
| Property, plant, and equipment (net) | 3,080,000 | 2,772,000 | |||||
| Total assets | $7,706,115 | $6,472,456 | |||||
| Liabilities | |||||||
| Current liabilities | $850,265 | $1,388,306 | |||||
| Long-term liabilities | |||||||
| Mortgage note payable, 8%, due 2021 | $1,260,000 | $0 | |||||
| Bonds payable, 8%, due 2017 | 1,540,000 | 1,540,000 | |||||
| Total long-term liabilities | $2,800,000 | $1,540,000 | |||||
| Total liabilities | $3,650,265 | $2,928,306 | |||||
| Stockholders' Equity | |||||||
| Preferred $0.7 stock, $50 par | $500,000 | $500,000 | |||||
| Common stock, $10 par | 570,000 | 570,000 | |||||
| Retained earnings | 2,985,850 | 2,474,150 | |||||
| Total stockholders' equity | $4,055,850 | $3,544,150 | |||||
| Total liabilities and stockholders' equity | $7,706,115 | $6,472,456 | |||||
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.
| 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 | % |
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The marketing manager has recently completed a sales forecast. She believes the company’s sales will increase by 1 percent each month over the previous month’s sales from December 2015 through March 2016. Then sales are expected to remain constant for several months. Helping Hand’s projected balance sheet as of December 31, 2015 is as follows: Cash $ 60,000 Accounts receivable 172,530 Marketable securities 10,000 Inventory 39,784 Buildings and equipment (net of accumulated depreciation) 600,000 Total assets $ 882,314 Accounts payable $ 111,940 Sales commissions payable 4,040 Bond interest payable 8,000 Property taxes payable 0 Bonds payable (4%; due in 2020) 600,000 Common stock 100,000 Retained earnings 58,334 Total liabilities and stockholders' equity $ 882,314 The following information has been accumulated to assist with preparing the master budget for the first quarter of 2016: 1) Projected sales for November 2015 are $200,000. Credit sales are typically 90% of total sales.
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