Twenty metrics of liquidity, Solvency, and Profitability The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $58 on December 31, 20Y8. AUTOMOTIVE SOLUTIONS INC.Comparative Income StatementFor the Years Ended December 31, 20Y8 and 20Y7 20Y8 20Y7 Sales $4,681,125 $4,312,980 Cost of goods sold (1,553,440) (1,429,160) Gross profit $3,127,685 $2,883,820 Selling expenses $(1,090,440) $(1,327,530) Administrative expenses (928,885) (779,660) Total operating expenses (2,019,325) (2,107,190) Operating income $1,108,360 $776,630 Other revenue and expense: Other income 58,340 49,570 Other expense (interest) (304,000) (167,200) Income before income tax $862,700 $659,000 Income tax expense (103,500) (78,800) Net income $759,200 $580,200 AUTOMOTIVE SOLUTIONS INC.Comparative Statement of Stockholders’ EquityFor the Years Ended December 31, 20Y8 and 20Y7 20Y8 20Y7 PreferredStock CommonStock RetainedEarnings PreferredStock CommonStock RetainedEarnings Balances, Jan. 1 $700,000 $800,000 $3,351,300 $700,000 $800,000 $2,832,900 Net income 759,200 580,200 Dividends: Preferred stock (9,800) (9,800) Common stock (52,000) (52,000) Balances, Dec. 31 $700,000 $800,000 $4,048,700 $700,000 $800,000 $3,351,300 AUTOMOTIVE SOLUTIONS INC.Comparative Balance SheetDecember 31, 20Y8 and 20Y7 Dec. 31, 20Y8 Dec. 31, 20Y7 Assets Current assets: Cash $912,060 $814,010 Temporary investments 1,380,420 1,348,930 Accounts receivable (net) 846,800 795,700 Inventories 627,800 481,800 Prepaid expenses 172,559 162,800 Total current assets $3,939,639 $3,603,240 Long-term investments 2,042,891 1,081,139 Property, plant, and equipment (net) 4,560,000 4,104,000 Total assets $10,542,530 $8,788,379 Liabilities Current liabilities $1,193,830 $1,847,079 Long-term liabilities: Mortgage note payable, 8%, due in 15 years $1,710,000 $0 Bonds payable, 8%, due in 20 years 2,090,000 2,090,000 Total long-term liabilities $3,800,000 $2,090,000 Total liabilities $4,993,830 $3,937,079 Stockholders' Equity Preferred $0.70 stock, $50 par $700,000 $700,000 Common stock, $10 par 800,000 800,000 Retained earnings 4,048,700 3,351,300 Total stockholders' equity $5,548,700 $4,851,300 Total liabilities and stockholders' equity $10,542,530 $8,788,379 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 $ 2. Current ratio 3. Quick ratio 4. Accounts receivable turnover 5. Days' sales in receivables days 6. Inventory turnover 7. Days' sales in inventory days 8. Debt ratio % 9. Ratio of liabilities to stockholders' equity 10. Ratio of fixed assets to long-term liabilities 11. Times interest earned times 12. Times preferred dividends earned times 13. Asset turnover 14. Return on total assets % 15. Return on stockholders’ equity % 16. Return on common stockholders’ equity % 17. Earnings per share on common stock $ 18. Price-earnings ratio 19. Dividends per share of common stock $ 20. Dividend yield % Can you please help with questions 13 - 15 thank you
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Twenty metrics of liquidity, Solvency, and Profitability
The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $58 on December 31, 20Y8.
AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7 |
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20Y8 | 20Y7 | |||
Sales | $4,681,125 | $4,312,980 | ||
Cost of goods sold | (1,553,440) | (1,429,160) | ||
Gross profit | $3,127,685 | $2,883,820 | ||
Selling expenses | $(1,090,440) | $(1,327,530) | ||
Administrative expenses | (928,885) | (779,660) | ||
Total operating expenses | (2,019,325) | (2,107,190) | ||
Operating income | $1,108,360 | $776,630 | ||
Other revenue and expense: | ||||
Other income | 58,340 | 49,570 | ||
Other expense (interest) | (304,000) | (167,200) | ||
Income before income tax | $862,700 | $659,000 | ||
Income tax expense | (103,500) | (78,800) | ||
Net income | $759,200 | $580,200 |
AUTOMOTIVE SOLUTIONS INC. Comparative Statement of For the Years Ended December 31, 20Y8 and 20Y7 |
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20Y8 | 20Y7 | |||||||||||||||||
Stock |
Common Stock |
Earnings |
Preferred Stock |
Common Stock |
Retained Earnings |
|||||||||||||
Balances, Jan. 1 | $700,000 | $800,000 | $3,351,300 | $700,000 | $800,000 | $2,832,900 | ||||||||||||
Net income | 759,200 | 580,200 | ||||||||||||||||
Dividends: | ||||||||||||||||||
Preferred stock | (9,800) | (9,800) | ||||||||||||||||
Common stock | (52,000) | (52,000) | ||||||||||||||||
Balances, Dec. 31 | $700,000 | $800,000 | $4,048,700 | $700,000 | $800,000 | $3,351,300 |
AUTOMOTIVE SOLUTIONS INC. Comparative Balance Sheet December 31, 20Y8 and 20Y7 |
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Dec. 31, 20Y8 | Dec. 31, 20Y7 | |||
Assets | ||||
Current assets: | ||||
Cash | $912,060 | $814,010 | ||
Temporary investments | 1,380,420 | 1,348,930 | ||
Accounts receivable (net) | 846,800 | 795,700 | ||
Inventories | 627,800 | 481,800 | ||
Prepaid expenses | 172,559 | 162,800 | ||
Total current assets | $3,939,639 | $3,603,240 | ||
Long-term investments | 2,042,891 | 1,081,139 | ||
Property, plant, and equipment (net) | 4,560,000 | 4,104,000 | ||
Total assets | $10,542,530 | $8,788,379 | ||
Liabilities | ||||
Current liabilities | $1,193,830 | $1,847,079 | ||
Long-term liabilities: | ||||
Mortgage note payable, 8%, due in 15 years | $1,710,000 | $0 | ||
Bonds payable, 8%, due in 20 years | 2,090,000 | 2,090,000 | ||
Total long-term liabilities | $3,800,000 | $2,090,000 | ||
Total liabilities | $4,993,830 | $3,937,079 | ||
Stockholders' Equity | ||||
Preferred $0.70 stock, $50 par | $700,000 | $700,000 | ||
Common stock, $10 par | 800,000 | 800,000 | ||
Retained earnings | 4,048,700 | 3,351,300 | ||
Total stockholders' equity | $5,548,700 | $4,851,300 | ||
Total liabilities and stockholders' equity | $10,542,530 | $8,788,379 |
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. |
$ | |
2. |
||
3. Quick ratio | ||
4. Accounts receivable turnover | ||
5. Days' sales in receivables | days | |
6. Inventory turnover | ||
7. Days' sales in inventory | days | |
8. Debt ratio | % | |
9. Ratio of liabilities to stockholders' equity | ||
10. Ratio of fixed assets to long-term liabilities | ||
11. Times interest earned | times | |
12. Times preferred dividends earned | times | |
13. Asset turnover | ||
14. Return on total assets | % | |
15. Return on stockholders’ equity | % | |
16. Return on common stockholders’ equity | % | |
17. Earnings per share on common stock | $ | |
18. Price-earnings ratio | ||
19. Dividends per share of common stock | $ | |
20. Dividend yield | % |
Can you please help with questions 13 - 15 thank you
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