Nineteen Measures of Solvency and Profitability The comparative financial statem

Question

Nineteen Measures of Solvency and Profitability

The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $67 on December 31, 2016.

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.

Check My Work2 more Check My Work uses remaining.

Blige Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 2016 and 2015     2016     2015 Retained earnings, January 1 $1,928,600 $1,628,300 Add net income for year 456,000 333,500 Total $2,384,600 $1,961,800 Deduct dividends On preferred stock $5,600 $5,600 On common stock 27,600 27,600 Total $33,200 $33,200 Retained earnings, December 31 $2,351,400 $1,928,600

Explanation / Answer

Answer to Part 1.

Working Capital = Current Assets – Current Liabilities
Working Capital = $1,650,448.00 - $569,120.00
Working Capital = $1,081,328.00

Answer to Part 2.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $1,650,448 / $569,120
Current Ratio = 2.9 : 1

Answer to Part 3.

Quick Ratio = (Current Assets – Inventory- Prepaid Expenses) / Current Liabilities
Quick Ratio = ($1,650,448 - $350,400 - $58,818) / 569,120
Quick Ratio = 1,241,230 / 569,120
Quick Ratio = 2.2 : 1

Answer to Part 4.

Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
Average Accounts Receivable = (459,900 + 430,700) / 2
Average Accounts Receivable = $445,300

Accounts Receivable Turnover = 2,461,400 / 445,300
Accounts Receivable Turnover = 5.5 times

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