Nineteen Measures of Solvency andProfitability
The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $52 on December 31, 2012.
| Blige Inc. | ||||
| Comparative Retained Earnings Statement | ||||
| For the Years Ended December 31, 2012 and 2011 | ||||
| 2012 | 2011 | |||
| Retained earnings, January 1 | $1,661,950 | $1,406,850 | ||
| Add net income for year | 369,200 | 288,200 | ||
| Total | $2,031,150 | $1,695,050 | ||
| Deduct dividends: | ||||
| On preferred stock | $12,600 | $12,600 | ||
| On common stock | 20,500 | 20,500 | ||
| Total | $33,100 | $33,100 | ||
| Retained earnings, December 31 | $1,998,050 | $1,661,950 | ||
| Blige Inc. | ||||
| Comparative Income Statement | ||||
| For the Years Ended December 31, 2012 and 2011 | ||||
| 2012 | 2011 | |||
| Sales | $2,394,265 | $2,202,700 | ||
| Sales returns and allowances | 11,910 | 7,740 | ||
| Net sales | $2,382,355 | $2,194,960 | ||
| Cost of goods sold | 817,600 | 752,190 | ||
| Gross profit | $1,564,755 | $1,442,770 | ||
| Selling expenses | $560,000 | $670,170 | ||
| Administrative expenses | 477,035 | 393,590 | ||
| Total operating expenses | 1,037,035 | 1,063,760 | ||
| Income from operations | $527,720 | $379,010 | ||
| Other income | 27,780 | 24,190 | ||
| $555,500 | $403,200 | |||
| Other expense (interest) | 136,000 | 75,200 | ||
| Income before income tax | $419,500 | $328,000 | ||
| Income tax expense | 50,300 | 39,800 | ||
| Net income | $369,200 | $288,200 | ||
| Blige Inc. | |||||
| Comparative Balance Sheet | |||||
| December 31, 2012 and 2011 | |||||
| Dec. 31, 2012 | Dec. 31, 2011 | ||||
| Assets | |||||
| Current assets: | |||||
| Cash | $390,570 | $347,360 | |||
| Temporary investments | 591,130 | 575,640 | |||
| Accounts receivable (net) | 401,500 | 379,600 | |||
| Inventories | 292,000 | 219,000 | |||
| Prepaid expenses | 73,896 | 69,470 | |||
| Total current assets | $1,749,096 | $1,591,070 | |||
| Long term investments | 1,023,394 | 300,598 | |||
| Property, plant, and equipment (net) | 2,210,000 | 1,989,000 | |||
| Total assets | $4,982,490 | $3,880,668 | |||
| Liabilities | |||||
| Current liabilities | $514,440 | $508,718 | |||
| Long term liabilities: | |||||
| Mortgage note payable, 8%, due 2017 | $760,000 | $0 | |||
| Bonds payable, 8%, due 2021 | 940,000 | 940,000 | |||
| Total long term liabilities | $1,700,000 | $940,000 | |||
| Total liabilities | $2,214,440 | $1,448,718 | |||
| Stockholders’ Equity | |||||
| Preferred $0.70 stock, $20 par | $360,000 | $360,000 | |||
| Common stock, $10 par | 410,000 | 410,000 | |||
| Retained earnings | 1,998,050 | 1,661,950 | |||
| Total stockholders’ equity | $2,768,050 | $2,431,950 | |||
| Total liabilities and stockholders’ equity | $4,982,490 | $3,880,668 | |||
Instructions:
Determine the following measures for 2012, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Assume 365 days a year.
| 1. Working capital: | $ | |
| 2. Current ratio: | ||
| 3. Quick ratio: | ||
| 4. Accounts receivable turnover: | ||
| 5. Number of days’ sales in receivables: | ||
| 6. Inventory turnover: | ||
| 7. Number of days’ sales in inventory: | ||
| 8. Ratio of fixed assets to long term liabilities: | ||
| 9. Ratio of liabilities to stockholders’ equity: | ||
| 10. Number of times interest charges are earned: | ||
| 11. Number of times preferred dividends earned: | ||
| 12. Ratio of net sales to assets: | ||
| 13. Rate earned on total assets: | % | |
| 14. Rate earned on stockholders’ equity: | % | |
| 15. Rate earned on common stockholders’ equity: | % | |
| 16. Earnings per share on common stock: | $ | |
| 17. Price earnings ratio: | ||
| 18. Dividends per share of common stock: | $ | |
| 19. Dividend yield: |
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