P9-4 Nineteen measures of liquidity, solvency, and profitability The comparative financial statements of Tec Solutions Inc. are as follows. The market price of Tec Solutions Inc. common stock was $89.75 on December 31, 20Y8. Tec Solutions Inc. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7 20Y8 20Y7 Sales $1,940,000 $1,450,000 Sales returns and allowances 15,000 10,000 Net sales $1,925,000 $1,440,000 Cost of goods sold 780,000 575,000 Gross profit $1,145,000 $ 865,000 Selling expenses $ 385,000 $ 365,000 Administrative expenses 215,000 200,000 Total operating expenses $ 600,000 $ 565,000 Income from operations $ 545,000 $ 300,000 Other income 25,000 43,000 $ 570,000 $ 343,000 Other expense (interest) 115,000 75,000 Income before income tax $ 455,000 $ 268,000 Income tax expense 91,000 40,000 Net income $ 364,000 $ 228,000

Tec Solutions Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y8 and 20Y7 20Y8 20Y7 Retained earnings, January 1 $381,000 $168,000 Add net income for year 364,000 228,000 Total $745,000 $396,000 Deduct dividends: On preferred stock $ 5,000 $ 5,000 On common stock 40,000 10,000 Total $ 45,000 $ 15,000 Retained earnings, December 31 $700,000 $381,000

TEc Solutions Inc. Comparative Balance Sheet December 31, 20Y8 and 20Y7 Dec. 31, 20Y8 Dec. 31, 20Y7 Assets Current assets: Cash $ 175,000 $ 200,000 Temporary investments 250,000 292,000 Accounts receivable (net) 190,000 160,000 Inventories 300,000 260,000 Prepaid expenses 50,000 13,000 Total current assets $ 965,000 $ 925,000 Long-term investments 400,000 100,000 Property, plant, and equipment (net) 1,135,000 875,000 Total assets $2,500,000 $1,900,000 Liabilities Current liabilities $ 200,000 $ 419,000 Long-term liabilities: Mortgage note payable, 8%, due in 15 years $ 500,000 Bonds payable, 10%, due in 20 years 750,000 $ 750,000 Total long-term liabilities $1,250,000 $ 750,000 Total liabilities $1,450,000 $1,169,000 Stockholders Equity Preferred $5 stock, $100 par $ 100,000 $ 100,000 Common stock, $5 par 250,000 250,000 Retained earnings 700,000 381,000 Total stockholders equity $1,050,000 $ 731,000 Total liabilities and stockholders equity $2,500,000 $1,900,000

Instructions Determine the following measures for 20Y8, rounding to one decimal place: 1. Working capital 2. Current ratio 3. Quick ratio 4. Accounts receivable turnover 5. Number of days sales in receivables 6. Inventory turnover 7. Number of days sales in inventory 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities to stockholders equity 10. Number of times interest charges earned 11. Number of times preferred dividends earned 12. Ratio of net sales to assets 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