Nineteen Measures of Solvency and Profitability The comparative financial statem

Question

Nineteen Measures of Solvency and Profitability

The comparative financial statements of Bettancort Inc. are as follows. The market price of Bettancort Inc. common stock was $71.25 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.

Bettancort Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 2016 and 2015     2016     2015 Retained earnings, January 1 $2,655,000 $2,400,000 Add net income for year 300,000 280,000 Total $2,955,000 $2,680,000 Deduct dividends: On preferred stock $15,000 $15,000 On common stock 10,000 10,000 Total $25,000 $25,000 Retained earnings, December 31 $2,930,000 $2,655,000

Explanation / Answer

1) Working capital = current assets - current liabilities

Current ratio = current assets / current liab.

quick ratio = (current assets - inventory - prepaid expenses) / current liab.

Accounts receivables = net sales / avergae accounts receivables

2016 2015 Current asset $11,00,000 967000 Current liab $4,40,000 $4,00,000 Inventory $67,000 $58,000 Prepaid expenses $1,53,000 $1,39,000 Accounts receivables $1,30,000 $1,10,000 Net sales $12,00,000 $10,00,000 Working capital $6,60,000 $5,67,000 Current ratio 2.50 2.42 Quick ratio 2.00 1.93 Accounts receivables turonver 9.23 9.09

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