Twenty metrics of liquidity,Solvency, andProfitability

The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $61 on December 31, 20Y8.

AUTOMOTIVE SOLUTIONS INC.

Comparative Income Statement

For the Years Ended December 31, 20Y8 and 20Y720Y820Y7Sales$1,160,700$1,069,430Cost of goods sold(444,570)(409,000)Gross profit$716,130$660,430Selling expenses$(228,140)$(281,640)Administrative expenses(194,350)(165,410)Total operating expenses(422,490)(447,050)Operating income$293,640$213,380Other revenue and expense:Other income15,46013,620Other expense (interest)(80,000)(44,000)Income before income tax$229,100$183,000Income tax expense(27,500)(22,300)Net income$201,600$160,700

AUTOMOTIVE SOLUTIONS INC.

Comparative Statement of Stockholders' Equity

For the Years Ended December 31, 20Y8 and 20Y720Y820Y7Preferred

StockCommon

StockRetained

EarningsPreferred

StockCommon

StockRetained

EarningsBalances, Jan. 1$180,000$210,000$921,275$180,000$210,000$784,725Net income201,600160,700Dividends:Preferred stock(6,300)(6,300)Common stock(17,850)(17,850)Balances, Dec. 31$180,000$210,000$1,098,725$180,000$210,000$921,275

AUTOMOTIVE SOLUTIONS INC.

Comparative Balance Sheet

December 31, 20Y8 and 20Y7Dec. 31, 20Y8Dec. 31, 20Y7AssetsCurrent assets:Cash$266,410$208,730Temporary investments403,210345,900Accounts receivable (net)226,300211,700Inventories175,200131,400Prepaid expenses50,39541,750Total current assets$1,121,515$939,480Long-term investments507,063271,942Property, plant, and equipment (net)1,200,0001,080,000Total assets$2,828,578$2,291,422LiabilitiesCurrent liabilities$339,853$430,147Long-term liabilities:Mortgage note payable, 8%, due in 15 years$450,000$0Bonds payable, 8%, due in 20 years550,000550,000Total long-term liabilities$1,000,000$550,000Total liabilities$1,339,853$980,147Stockholders' EquityPreferred $0.70 stock, $20 par$180,000$180,000Common stock, $10 par210,000210,000Retained earnings1,098,725921,275Total stockholders' equity$1,488,725$1,311,275Total liabilities and stockholders' equity$2,828,578$2,291,422

Instructions:

Determine the following measures for 20Y8. Round ratio values to one decimal place and dollar amounts to the nearest cent. For number of days' sales in receivables and number of days' sales in inventory, round intermediate calculations to the nearest whole dollar and final amounts to one decimal place. Assume there are 365 days in the year.

1.Working capital$fill in the blank 1

2.Current ratiofill in the blank 2

3.Quick ratiofill in the blank 3

4.Accounts receivable turnoverfill in the blank 4

5.Days' sales in receivablesfill in the blank 5

days6.Inventory turnoverfill in the blank 6

7.Days' sales in inventoryfill in the blank 7

days8.Debt ratiofill in the blank 8

%9.Ratio of liabilities to stockholders' equityfill in the blank 9

10.Ratio of fixed assets to long-term liabilitiesfill in the blank 10

11.Times interest earnedfill in the blank 11

times12.Times preferred dividends earnedfill in the blank 12

times13.Asset turnoverfill in the blank 13

14.Return on total assetsfill in the blank 14

%15.Return on stockholders' equityfill in the blank 15

%16.Return on common stockholders' equityfill in the blank 16

%17.Earnings per share on common stock$fill in the blank 17

18.Price-earnings ratiofill in the blank 18

19.Dividends per share of common stock$fill in the blank 19

20.Dividend yieldfill in the blank 20

%

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 net 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 net 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 cost of goods sold are cost of goods sold divided by 365 days.

8. Divide total liabilities by total assets.

9. Divide total liabilities by total stockholders' equity.

10. Divide property, plant and equipment (net) by long-term liabilities.

11. Divide the sum of income before income tax plus interest expense by interest expense.

12. Divide net income by preferred dividends [Preferred stock par value x dividend per preferred share].

13. Divide net sales by average property, plant & equipment, . Average PPE = (Beginning PPE + Ending PPE) 2

14. Divide the sum of net income plus interest expense by average total assets. Average total assets = (Beginning Total Assets + Ending Total Assets) 2

15. Divide net income by average stockholders' equity. Average stockholders' equity = (Beginning Stockholders'Equity + Ending Stockholders'Equity) 2

16. Divide net income minus preferred dividends [Preferred stock par value x dividend per preferred share] 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

17. Divide net income minus preferred dividends [Preferred stock par value x dividend per preferred share] by common shares outstanding (common stock par value).

18. Divide common market share price by common earnings per share (use answer from requirement 17).

19. Divide common dividends (from Statement of Stockholders Equity) by common shares outstanding (common stock par value).

20. Divide common dividends per share (use answer from requirement 19) by market share price.