Mastery Problem: Financial Statement Analysis Liquidity and Solvency Measures 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: tigin by looking for simple computations and identifying the wounts in those computationo took for other measures that use those amounts) Liquidity and Solvency Measures Computations Woricing capital Current ratio Quick ratio Accounts receivable turnover Number of days' sales in receivables Inventory turnover Number of days' sales in inventory Ratio of fixed assets to long-term abilities Ratio of liabilities to stockholders' equity Times interest earned Balance Sheet Use the following balance sheet form to enter amounts you identity from the computations on the Liquidity and Solvency Measures part. You will identify the amounts for the balance sheet on the Profitability Measures part. If you have a choice of two amounts, assume the first amount in the ratio is for the end of the year Computer any missing amounts Balance Sheet December 31, 2016 Assets Current assets: Cash $823,000 Marketable securities Accounts receivable (net) Inventory Prepaid expenses Total current assets Long-term investments TUNIT Property, plant, and equipment (net) Total assets Liabilities Current liabilities Innom liahilities Foldi assets Liabilities Current liabilities 0001 Long term liabilities Total liabilities Stockholders' Equity Preferred stock, $10 par Common stock $5 par Retained earnings Total stockholders' equity Total liabilities and stockholders equity 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 Use the following comparative income statement form to enter amounts you Identify from the computations on the Liquidity and Solvency Measures part and on the Profitability Measures part. Compute any missing amounts and complete the horizontal analysis columns, Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only at the figure to the right of one decimal place. If 5, round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%, Comparative Income Statement For the Years Ended December 31, 2016 and 2045 Increase/(Decrease) 2046 20YS Amount Percentage Sales $7,257,000 % Cost of goods sold (3,444,000) % Gross profit $3,813,000 % Selling expenses $(1,451,000) % Administrative expenses (1,237,500) (1,101,500) % Total operating expenses $(2,552,500) % Operating income $1,260,500 % Other expense (interest) (120,600) % Income before income tax expense $1,139,900 Income tax expense (178,200) % $961,700 % Net income TOTO INI TUTTI 2 Mastery Problem: Financial Statement Analysis Liquidity and Solvency Measures 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 bet! 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 $3,093,000 - $880,000 Current ratio $3,093.000+ $880.000 Quick ratio $1,866,000+ $880,000 Accounts receivable turnover $8,250.000 (5714,000 + $740,000+ 21 Number of days' sales in receivables [$714,000 + $740,000) + 2 + $8,250,000 $365) Inventory turnover $4,100,000+($1,072,000 + $1,100,000 + 21 Number of days' sales in inventory ($1,072,000+ $1,100,000+ 2+ $4,100,000 $365) Ratio of fixed assets to long-term liabilities $2,690,000+ $1,690,000 Ratio of liabilities to stockholders' equity $2,570,000+ $4,037,000 5970 500 +$127.000 4 $127.000 Times interest earned Balance Sheet Use the following balance sheet form to enter amounts you identify from the computations on the Liquidity and Solvency Measures part. You will identify other amounts for the balance sheet on the Profitability Measures part. If you have a choice of two amounts, assume the first amount in the ratio is for the end of the year. Compute any missing amounts. Balance Sheet December 31, 2016 Assets Current assets: Cash $823,000 Marketable securities Accounts receivable (net) Inventory Prepaid expenses Total current assets Long-term investments I Property, plant, and equipment (net) Indu Total assets Liabilities Current liabilities Liabilities Current liabilities Long-term liabilities Total liabilities Stockholders' Equity Preferred stock, $10 par Common stock, $s par Retained earnings Total stockholders' equity I Total liabilities and stockholders' equity (II dild! Profitability Measures Match each computation to one of the profitability measures in the table. Profitability Measures Computations Asset turnover $8,250,000 $5,783,000 + $5.593,000 + 2] Return on total assets ($286 300+ $127.000 ($6,607,000+ $6,417,000+ 21 Return on stockholders' equity Return on common stockholders' equity Earnings per share on common stock Price-earnings ratio Dividends per share $786,300 + (54,037,000+ $3,635,150 + 2 (5786 300 - $65,000 + (53.549.500 + $3,407,520) + 2) ($786,300 - $65.000 250.000 shares $35 + $3.05 $175,000 + 250,000 shares Dividend yield $0.70 + $35 Use the following comparative Income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Measures part and on the Profitability Measures part. Compute any missing amounts and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only at the figure to the right of one decimal place. If 5, round down and ir 25, round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%. Comparative Income Statement For the Years Ended December 31, 20Y6 and 20YS Increase/(Decrease) 2016 20Y5 Amount Percentage Sales $7,257,000 % Cost of goods sold (3,444,000) % Gross profit $3,813,000 % Selling expenses $(1,451,000) % Administrative expenses (1,237,500) (1,101,500) % Total operating expenses $(2,552,500) % Operating income 1 $1,260,500 $ % Other expense (Interest) (120,600) % Income before income tax expense $1,139,900 % Income tax expense (178,200) % III. $961,700 % Net Income