Mastery Problem: Financial Statement Analysis

Question Content Area

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

$$8,250,000-$: $[($$$714,000+$ $$740,000)-$: $2]$

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)-$: $2]$

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$

Times interest earned

$($$$970,500+$ $$127,000)-$: $$127,000$ 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 $31,20$Y$6$

Assets

Current assets:

Cash $$823,000$

Marketable securities fill in the blank f$960$b$506$a$073$fc$9\_1$

$329,000$

Accounts receivable $($net$)$ fill in the blank f$960$b$506$a$073$fc$9\_2$

$714,000$

Inventory fill in the blank f$960$b$506$a$073$fc$9\_3$

$1,072,000$

Prepaid expenses fill in the blank f$960$b$506$a$073$fc$9\_4$

$155,000$

Total current assets $fill in the blank f$960$b$506$a$073$fc$9\_5$

$3,093,000$

Long$-$term investments fill in the blank f$960$b$506$a$073$fc$9\_6$

$824,000$

Property, plant, and equipment $($net$)$ fill in the blank f$960$b$506$a$073$fc$9\_7$

$2,690,000$

Total assets $fill in the blank f$960$b$506$a$073$fc$9\_8$

$6,607,000$

Liabilities

Current liabilities $fill in the blank f$960$b$506$a$073$fc$9\_9$

$880,000$

Long$-$term liabilities fill in the blank f$960$b$506$a$073$fc$9\_10$

$1,690,000$

Total liabilities $fill in the blank f$960$b$506$a$073$fc$9\_11$

$2,570,000$

Stockholders' Equity

Preferred stock, $$10$ par $fill in the blank f$960$b$506$a$073$fc$9\_12$

$487,500$

Common stock, $$5$ par fill in the blank f$960$b$506$a$073$fc$9\_13$

$1,250,000$

Retained earnings fill in the blank f$960$b$506$a$073$fc$9\_14$

$2,299,500$

Total stockholders' equity $fill in the blank f$960$b$506$a$073$fc$9\_15$

$4,037,000$

Total liabilities and stockholders' equity $fill in the blank f$960$b$506$a$073$fc$9\_16$

$6,607,000$

Question Content Area

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

$($$$786,300+$ $$127,000)-$: $[($$$6,607,000+$ $$6,417,000)-$: $2]$

Return on stockholders' equity

$$786,300-$: $[($$$4,037,000+$ $$3,835,150)-$: $2]$

Return on common stockholders' equity

$($$$786,300$ $$65,000)-$: $[($$$3,549,500+$ $$3,407,520)-$: $2]$

Earnings per share on common stock

$($$$786,300$ $$65,000)-$: $250,000$ shares

Price$-$earnings ratio

$$35-$: $$3\mathrm{.}05$

Dividends per share

$$175,000-$: $250,000$ shares

Dividend yield

$$0\mathrm{.}70-$: $$35$ AND NOW I NEED HELP WITH THIS COMPARATIVE INCOME STATEMENT BASED ON WHAT I HAVE PROVIDED