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Nineteen Measures of Solvency and Profitability The comparative financial statem

ID: 2413581 • Letter: N

Question

Nineteen Measures of Solvency and Profitability The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel Inc. common stock was $119.70 on December 31, 2016 Stargel Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 2016 and 2015 2015 $4,545,000 322,00 2016 Retained earnings, January 1 Add net income for year Total Deduct dividends: $5,375,000 900,000 $6,275,000 $45,000 50,000 $95,000 $6,180,000 $45,000 50,000 $95,000 $5,375,000 On preferred stock On common stock Total Retained earnings, December 31

Explanation / Answer

1. Fixed assets to long-term liabilities 2.2    (3,740,000 / 1,700,000) 2. Liabilities to stockholders' equity 0.36    (2,600,000 / 7,180,000) 3. Number of times and interest charges earned 7.65       (1,300,000 / 170,000) 4. Ratio of sales to assets 1.02         (10,000,000 / 9,780,000) 5. Rate earned on total assets 9.20% (Net income / total Assets) - 900,000 / 9,780,000 6.Rate earned on stockholders' equity 12.5%    (Net income / total stockholders' equity) - 900,000 / 7,180,000 7. Earnings per share of common stock $8.55 (Earnings available for comon stock / number of    common stock shares outstanding) -(900,000-45,000)/100,000 8.Price earnings ratio      (Market price per share / Earnings per share) = $119.70/$8.55 14.0 9. Dividends per share of common stock $0.05      (50,000 / 100,000) - Dividends paid / number of shares 10. Dividend yield 0.04%      (Dividend per share / market price)   --- ($0.05/$119.70)

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