Financial information for Messersmith Company is presented below. MESSERSMITH CO
ID: 2490445 • Letter: F
Question
Financial information for Messersmith Company is presented below.
MESSERSMITH COMPANY
Balance Sheets
December 31
Assets
2017
2016
Liabilities and Stockholders’ Equity
MESSERSMITH COMPANY
Income Statement
For the Years Ended December 31
2017
2016
Additional information:
Notes payable are classified as current liabilities.
Indicate, by using ratios, the change in liquidity and profitability of Messersmith Company from 2016 to 2017.
MESSERSMITH COMPANY
Balance Sheets
December 31
Assets
2017
2016
Cash $ 119,700 $ 111,150 Short-term investments 88,920 68,400 Accounts receivable (net) 167,580 136,800 Inventory 213,750 230,850 Prepaid expenses 49,590 39,330 Land 222,300 222,300 Building and equipment (net) 307,800 299,250 $1,169,640 $1,108,080Liabilities and Stockholders’ Equity
Notes payable $171,000 $171,000 Accounts payable 82,080 71,820 Accrued liabilities 85,500 68,400 Bonds payable, due 2020 256,500 256,500 Common stock, $10 par 342,000 342,000 Retained earnings 232,560 198,360 $1,169,640 $1,108,080Explanation / Answer
Liquidity Ratios Year 2017. Year 2016. Current Ratio=Current Asset/Current Liabilities 1.89 1.89 Quick Ratio =(Current Asset-Inventory-Prepaid Expense)/Current Liab 1.12 1.02 Avearge Inventory 223,300 216,315 Cost of Goods Sold 1,060,200 983,250 Inventory turnover Ratio=COGS/Avg Inventory 4.75 4.55 times Average Accounts Receivable 152,190 143,640 Net Credit Sales 1,453,500 1,350,900 Accounts Receivable Turnover = 9.55 9.40 times Profitability Ratios Gross Profit Ratio= 27.06% 27.22% Net Profit Ratio= 5.06% 5.32% Average Total Assets 1,138,860 1,092,690 Return on Assets=Net Income/Avg Assets 6.46% 6.57% Total Stockholders Equity (common stock+retained earning ) 574,560 540,360 Return on Equity =Net Income/Total Equity= 12.80% 13.29%
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