Nineteen Measures of Liquidity, Sol vency, and Profitability The comparative fin

Question

Nineteen Measures of Liquidity, Sol vency, and Profitability The comparative financial statements of Tec Solutions Inc. are as follows. The market price of Tec Solutions Inc. common stock was $89.75 on December 31, 20Y8 TEC SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y Administrative expenses operating expenses Income from operations Income before income tax $ 455,000 TEC SOLUTIONS INC Comparative Retained Earnings Statement For the Years Ended December 31, 20Y8 and 20Y7 Retained earnings, January 5745000$06.000 stock Retained eamings, December 31 December 31, 20Y8 and 20Y7 Assets 5 175,00 5 200,000 Accounts receivable (net) Total current assets 965,000 Long-term investments Property, plant, and equipment (net) 419,000 s 500,000 Mortgage note payable, 8%, due in 15 years Bonds payable, 10%, due in 20 years Total long-term liabilities Stockholders Equity Preferred S5 stock, $100 par Common stock, $5 par S 100,000 S 100,000 Total stockholders equity Total liabilities and stockholders equity Instructions:

Explanation / Answer

8) Ratio of Fixed Asset to Long term liability = Fixed Asset/Long term liability

Ratio of Fixed Asset to Long term liability = 1135000/1250000

Ratio of Fixed Asset to Long term liability = 0.9

12) Ratio of Net Sale to Assets = Net Sale/Average Total Assets

Ratio of Net Sale to Assets = 1925000/((2500000+1900000)/2)

Ratio of Net Sale to Assets = 0.9

13) Rate earned on total assets = Net Income/Average Total Assets

Rate earned on total assets = 364000/((2500000+1900000)/2)

Rate earned on total assets = 16.5%

14)Rate earned on Stockholders Equity = Net Income/Average Stockholders Equity

Rate earned on Stockholders Equity = 364000/((1050000+731000)/2)

Rate earned on Stockholders Equity = 40.9%

15)Rate earned on common Stockholders Equity = (Net Income-prefered dividend)/(Average Stockholders Equity-Prefered Stock)

Rate earned on common Stockholders Equity = (364000-5000)/((1050000+731000)/2-100000)

Rate earned on common Stockholders Equity = 45.4%

16) Earning Per Share = (Net Income-prefered dividend)/No of Outstanding Share

Earning Per Share = (364000-5000)/(250000/5)

Earning Per Share = $7.2

17)

Price Earning Ratio = Price/EPS

Price Earning Ratio = 89.75/7.18

Price Earning Ratio = 12.5

18)

Dividend per share of common stock = Common stock dividend/No of Outstanding Share

Dividend per share of common stock = 40000/(250000/5)

Dividend per share of common stock = 0.8

19) Dividend Yield = Dividend per share/Market price per share

Dividend Yield = 0.8/89.75

Dividend Yield = 0.9

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