Nineteen Measures of Solvency and Profitability The comparative financial statements of Blige Inc. are as follows. The market price of Blige Inc. common stock was $65 on December 31, 2016. Blige Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 2016 and 2015 2016 2015 Retained earnings, January 1 $4,503,950 $3,789,650 Add net income for year 994,000 776,200 Total $5,497,950 $4,565,850 Deduct dividends On preferred stock $13,300 $13,300 On common stock 48,600 48,600 Total $61,900 $61,900 Retained earnings, December 31 $5,436,050 $4,503,950 Blige Inc. Comparative Income Statement For the Years Ended December 31, 2016 and 2015 2016 2015 Sales $7,106,130 $6,537,600 Sales returns and allowances 35,350 22,980 Sales $7,070,780 $6,514,620 Cost of goods sold 2,557,190 2,352,610 Gross profit $4,513,590 $4,162,010 Selling expenses $1,603,460 $1,938,200 Administrative expenses 1,365,910 1,138,300 Total operating expenses 2,969,370 3,076,500 Income from operations $1,544,220 $1,085,510 Other income 81,280 69,290 $1,625,500 $1,154,800 Other expense (interest) 496,000 272,800 Income before income tax $1,129,500 $882,000 Income tax expense 135,500 105,800 Net income $994,000 $776,200 Blige Inc. Comparative Balance Sheet December 31, 2016 and 2015 Dec. 31, 2016 Dec. 31, 2015 Assets Current assets Cash $1,721,620 $938,330 Temporary investments 2,605,700 1,554,940 Accounts receivable (net) 1,255,600 1,182,600 Inventories 934,400 715,400 Prepaid expenses 325,707 187,670 Total current assets $6,843,027 $4,578,940 Long-term investments 2,015,678 451,202 Property, plant, and equipment (net) 6,820,000 6,138,000 Total assets $15,678,705 $11,168,142 Liabilities Current liabilities $2,012,655 $1,224,192 Long-term liabilities Mortgage note payable, 8%, due 2021 $2,790,000 $0 Bonds payable, 8%, due 2017 3,410,000 3,410,000 Total long-term liabilities $6,200,000 $3,410,000 Total liabilities $8,212,655 $4,634,192 Stockholders' Equity Preferred $0.7 stock, $50 par $950,000 $950,000 Common stock, $10 par 1,080,000 1,080,000 Retained earnings 5,436,050 4,503,950 Total stockholders' equity $7,466,050 $6,533,950 Total liabilities and stockholders' equity $15,678,705 $11,168,142 Required: Determine the following measures for 2016, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year. 1. Working capital $ 4,830,372 2. Current ratio 3.4 3. Quick ratio 2.7 4. Accounts receivable turnover 5.8 5. Number of days' sales in receivables 62.9 days 6. Inventory turnover 8.5 7. Number of days' sales in inventory 42.9 days 8. Ratio of fixed assets to long-term liabilities 1.1 9. Ratio of liabilities to stockholders' equity 1.1 10. Number of times interest charges are earned 11. Number of times preferred dividends are earned 74.7 12. Ratio of sales to assets 1.8 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 % Feedback 1. Subtract current liabilities from current assets. 2. Divide current assets by current liabilities. 3. Divide quick assets by current liabilities. Quick assets are cash, temporary investments, and receivables. 4. Divide sales by average accounts receivable. Average Accounts receivable = (Beginning Net Accounts Receivable + Ending Net Accounts Receivable) 2. 5. Divide average accounts receivable by average daily sales. Average Accounts receivable = (Beginning Net Accounts Receivable + Ending Net Accounts Receivable) 2. Average daily sales are sales divided by 365 days. 6. Divide cost of goods sold by average inventory. Average Inventory = (Beginning Inventories + Ending Inventories) 2. 7. Divide average inventory by average daily cost of goods sold. Average Inventory = (Beginning Inventories + Ending Inventories) 2. Average daily cost of goods sold are cost of goods sold divided by 365 days. 8. Divide property, plant and equipment (net) by long-term liabilities. 9. Divide total liabilities by total stockholders' equity. 10. Divide the sum of income before income tax plus interest expense by interest expense. 11. Divide net income by preferred dividends from the retained earnings statement. 12. Divide sales by average total assets, excluding long-term investments. Average total assets = (Beginning total assets + Ending total assets) 2. 13. Divide the sum of net income plus interest expense by average total assets. Average total assets = (Beginning total assets + Ending total assets) 2. 14. Divide net income by average total stockholders' equity. Average total stockholders' equity = (Beginning total stockholders' equity + Ending total stockholders' equity) 2. 15. Divide net income minus preferred dividends from the retained earnings statement by average common stockholders' equity. Common stockholders' equity = Common stock + Retained earnings. Average common stockholders' equity = (Beginning common stockholders' equity + Ending common stockholders' equity) 2. 16. Divide net income minus preferred dividends from the retained earnings statement by common shares outstanding (common stock par value). 17. Divide common market share price by common earnings per share (use answer from requirement 16). 18. Divide common dividends (from Retained Earnings Statement) by common shares outstanding (common stock par value). 19. Divide common dividends per share (use answer from requirement 18) by market share price. Learning Objective 2, Learning Objective 3.