prepald exp J. Paid cash for PR 14-4B Measures of liquidity, solvency and profit

Question

prepald exp J. Paid cash for PR 14-4B Measures of liquidity, solvency and profitability The comparative financial statements of Stargel Inc. are as follows. common stock was $119.70 on December 31, 20Y2. Obj. 3, 4,5 gel The t price of Star Stargel Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 . .$5,375,000 $4,545,000 925,000 $6.275,000 $5,A70,000 Total Dividends . 45,000 50,000 45,000 50,000 $ 95,000 On preferred stock Total dividends. . . 95,000 Retained earnings, December 31..$6,180,000 $5,375,000

Explanation / Answer

1. Working capital = Current assets - Current liabilities

= $3690000 - $900000

= $2790000.

2. Current ratio = Current assets / Current liabilities

= $3690000 / $900000

= 4.1 times.

3. Quick ratio = (Current assets - Inventory - prepaid expenses) / Current liabilities

= ($3690000 - $1190000 - 250000) / $900000

= 2.5 times

4. accounts receivable turnover = Credit sales / average accounts receivable turnover

= $10000000 / ($740000 + $510000)/2

= 16 times

5. Number of days in receivables = 365 days / 16 times

= 22.81 days.

6. Inventory turnover ratio = Cost of goods sold / average inventory

= $5350000 / ($1190000 + $950000)/2

= 5 times

7. Number of days in inventory = 365 days / 5 times

= 73 days.

8. Ratio of fixed assets to long term liabilities = $6090000 / $1700000

= 3.58

9. Ratio of liabilities to Shareholders equity = $2600000 / $7180000

= 0.36

10. Times interest earned = EBIT / Interest expense

= $1150000 / $170000

= 6.76 times.

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