Liquidity and Solvency Measures Current ratio Your friend, another accountant, has bet you that with your knowledge of accounting and just the computations for common analytical measures, you can figure out many aspects of a company's financial statements. You take the beti Match each computation to one of the liquidity and solvency measures in the table. (Hint: Begin by looking for simple computations and identifying the amounts in those computations. Look for other measures that use those amounts.) Liquidity and Solvency Measures Computations Working capital $3,091,000 - $900,000 $3,091,000 $900,000 Quick ratio $1,866,000 3900,000 $10,200,000 1671,000 3740,000) 21 Number of days' sales in receivables 6714,000 + $740.000) 2] + 68,200,000 365 $4,100,000 - [61,072,000 $1,100.000) Number of days sales in inventory (62072.000 + 51,100,000) + 2) (54,100,000 + 365V Ratio of fixed assets to long term labilities $2,690,000 $1,600,000 Ratio of liabilities to stockholders' equity (5989400+ $127.000 $127.000 Accounts receivable turnover Inventory turnover $2,500,000 $4.015.000 Times interest earned Feed Balance Sheet December 31, 2016 Assets Current assets: Cash $823,000 Marketable securities 303,000 x Accounts receivable (net) Inventory Prepaid expenses Total current assets Long-term investments Property, plant, and equipment (net) Total assets $ Liabilities Current liabilities $ Long-term liabilities Total liabilities Stockholders' Equity Stockholders' Equity Preferred stock, $10 par Common stock, $5 par Retained earnings IIIII Total stockholders equity Total liabilities and stockholders equity Feedback Check My Work Profitability Measures Match each computation to one of the profitability measures in the table. Profitability Measures Computations Asset turnover Return on total assets Return on stockholders' equity Return on common stockholders' equity Earnings per share on common stock Price-earnings ratio Dividends per share Dividend yield % Comparative Income Statement For the Years Ended December 31, 2016 and 2085 Increase/(Decrease) 2046 2015 Amount Percentage Sales $7,287,000 Cost of goods sold (3,444,000) Gross profit $3,843,000 Selling expenses $(1,457,600) Administrative expenses (1,242,000) (1,106,000) Total operating expenses $(2,563,600) Operating income $1,279,400 Other expense (interest) (120,600) Income before income tax expense $1,158,800 Income tax expense (181,980) Net income $976,820 9% % % INICIO % Feedback Final Questions Your accountant friend reveals that the company whose Information you have been working on is actually a company he is thinking of investing in. W advice and insight do you have for your friend? Using only the information from your horizontal analysis of the comparative Income statement, complete the following sentences. has decreased significantly from 2075 to 2016, even though has increased. However, has also which slowed the increase in In addition has Increased at a faster rate. The company appears Based on these observations, do you recommend that your friend invest in this company's stock