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

Quick ratio $$1,866,000-$: $$860,000$ Correct

Ratio of fixed assets to long$-$term liabilities $$2,690,000-$: $$1,690,000$ Correct

Inventory turnover $$4,100,000-$: $[($$$1,072,000+$ $$1,100,000)-$: $2]$ Correct

Accounts receivable turnover $$8,260,000-$: $[($$$714,000+$ $$740,000)-$: $2]$ Correct

Number of days' sales in receivables $[($$$714,000+$ $$740,000)-$: $2]-$: $($$$8,260,000-$: $365)$ Correct

Times interest earned $($$$976,800+$ $$127,000)-$: $$127,000$ Correct

Current ratio $$3,095,000-$: $$860,000$ Correct

Ratio of liabilities to stockholders' equity $$2,550,000-$: $$4,059,000$ Correct

Working capital $$3,095,000$ $$860,000$ Correct

Number of days' sales in inventory $[($$$1,072,000+$ $$1,100,000)-$: $2]-$: $($$$4,100,000-$: $365)$ Correct

Use the following balance sheet form to enter amounts you identify from the computations on the Liquidity and Solvency Measures panel. You will identify other amounts for the balance sheet on the Profitability Measures panel. 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.

Score: $38/64$

Balance Sheet

December $31,20$Y$6$

$1$

Assets

$2$

Current assets:

$3$

Cash

$$823,000\mathrm{.}00$

$4$

Marketable securities

$329,000\mathrm{.}00$

$$

$5$

Accounts receivable $($net$)$

$714,000\mathrm{.}00$

$$

$6$

Inventory

$1,072,000\mathrm{.}00$

$$

$7$

Prepaid expenses

$8$

Total current assets

$9$

Long$-$term investments

$824,000\mathrm{.}00$

$$

$10$

Property, plant, and equipment $($net$)$

$2,690,000\mathrm{.}00$

$$

$11$

Total assets

$12$

Liabilities

$13$

Current liabilities

$14$

Long$-$term liabilities

$1,690,000\mathrm{.}00$

$$

$15$

Total liabilities

$16$

Stockholders$$ Equity

$17$

Preferred stock, $$10$ par

$$487,500\mathrm{.}00$

$$

$18$

Common stock, $$5$ par

$1,250,000\mathrm{.}00$

$$

$19$

Retained earnings

$20$

Total stockholders$$ equity

$21$

Total liabilities and stockholders$$ equity

Match each computation to one of the profitability measures in the table.

Profitability Measures Computations

Asset turnover $$8,260,000-$: $[($$$6,609,000+$ $$6,419,000)-$: $2]$ Correct

Return on total assets $($$$791,340+$ $$127,000)-$: $[($$$6,609,000+$ $$6,419,000)-$: $2]$ Correct

Return on stockholders$$ equity $$791,340-$: $[($$$4,059,000+$ $$3,856,050)-$: $2]$ Correct

Return on common stockholders$$ equity $($$$791,340$ $$65,000)-$: $[($$$3,571,500+$ $$3,428,640)-$: $2]$ Correct

Earnings per share on common stock $($$$791,340$ $$65,000)-$: $250,000$ shares Correct

Price$-$earnings ratio $$35-$: $$3\mathrm{.}05$ Correct

Dividends per share $$175,000-$: $250,000$ shares Correct

Dividend yield $$0\mathrm{.}70-$: $$35$ Correct

Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Measures panel and on the Profitability Measures panel. 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 round down and if $>=5,$ round up$.$ For example, for $32\mathrm{.}048\%$ enter $32\mathrm{.}0\%.$ For $32\mathrm{.}058\%$ enter $32\mathrm{.}1\%.$

Score: $8/128$

Comparative Income Statement

For the Years Ended December $31,20$Y$6$ and $20$Y$5$

$1$

$20$Y$6$

$20$Y$5$

Amount Increase $($Decrease$)$

Percentage Increase $($Decrease$)$

$2$

Sales

$$7,267,000\mathrm{.}00$

$3$

Cost of goods sold

$4,100,000\mathrm{.}00$

$$

$3,444,000\mathrm{.}00$

$4$

Gross profit

$$3,823,000\mathrm{.}00$

$5$

Selling expenses

$$1,453,200\mathrm{.}00$

$6$

Administrative expenses

$1,239,000\mathrm{.}00$

$1,103,000\mathrm{.}00$

$7$

Total operating expenses

$$2,556,200\mathrm{.}00$

$8$

Income from operations

$$1,266,800\mathrm{.}00$

$9$

Interest expense

$120,600\mathrm{.}00$

$10$

Income before income tax

$$1,146,200\mathrm{.}00$

$11$

Income tax expense

$179,460\mathrm{.}00$

$12$

Net income

$$966,740\mathrm{.}00$