Nineteen Measures of Solvency andProfitability
The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $66 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 | $3,190,450 | $2,690,350 | ||
| Add net income for year | 750,000 | 551,000 | ||
| Total | $3,940,450 | $3,241,350 | ||
| Deduct dividends: | ||||
| On preferred stock | $11,900 | $11,900 | ||
| On common stock | 39,000 | 39,000 | ||
| Total | $50,900 | $50,900 | ||
| Retained earnings, December 31 | $3,889,550 | $3,190,450 | ||
| Blige Inc. | ||||
| Comparative Income Statement | ||||
| For the Years Ended December 31, 2012 and 2011 | ||||
| 2012 | 2011 | |||
| Sales | $4,734,240 | $4,355,500 | ||
| Sales returns and allowances | 23,550 | 15,310 | ||
| Net sales | $4,710,690 | $4,340,190 | ||
| Cost of goods sold | 1,714,770 | 1,577,590 | ||
| Gross profit | $2,995,920 | $2,762,600 | ||
| Selling expenses | $995,890 | $1,252,230 | ||
| Administrative expenses | 848,350 | 735,430 | ||
| Total operating expenses | 1,844,240 | 1,987,660 | ||
| Income from operations | $1,151,680 | $774,940 | ||
| Other income | 60,620 | 49,460 | ||
| $1,212,300 | $824,400 | |||
| Other expense (interest) | 360,000 | 198,400 | ||
| Income before income tax | $852,300 | $626,000 | ||
| Income tax expense | 102,300 | 75,000 | ||
| Net income | $750,000 | $551,000 | ||
| Blige Inc. | |||||
| Comparative Balance Sheet | |||||
| December 31, 2012 and 2011 | |||||
| Dec. 31, 2012 | Dec. 31, 2011 | ||||
| Assets | |||||
| Current assets: | |||||
| Cash | $1,212,220 | $731,890 | |||
| Temporary investments | 1,834,710 | 1,212,830 | |||
| Accounts receivable (net) | 897,900 | 846,800 | |||
| Inventories | 671,600 | 511,000 | |||
| Prepaid expenses | 229,338 | 146,380 | |||
| Total current assets | $4,845,768 | $3,448,900 | |||
| Long term investments | 88,287 | 706,937 | |||
| Property, plant, and equipment (net) | 6,300,000 | 5,670,000 | |||
| Total assets | $11,234,055 | $8,411,963 | |||
| Liabilities | |||||
| Current liabilities | $1,384,505 | $1,281,513 | |||
| Long term liabilities: | |||||
| Mortgage note payable, 8%, due 2017 | $2,020,000 | $0 | |||
| Bonds payable, 8%, due 2021 | 2,480,000 | 2,480,000 | |||
| Total long term liabilities | $4,500,000 | $2,480,000 | |||
| Total liabilities | $5,884,505 | $3,761,513 | |||
| Stockholders’ Equity | |||||
| Preferred $0.70 stock, $40 par | $680,000 | $680,000 | |||
| Common stock, $10 par | 780,000 | 780,000 | |||
| Retained earnings | 3,889,550 | 3,190,450 | |||
| Total stockholders’ equity | $5,349,550 | $4,650,450 | |||
| Total liabilities and stockholders’ equity | $11,234,055 | $8,411,963 | |||
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: | % |