Quick Ratio
Calculate the quick ration for Smith& Sons Inc for 2015 and 2016 and comment on the companyâsworking capital position. Did the companyâs ability to pay itscurrent liabilities improve over the two years?
Quick ratio = (cash and cashequivalents + Short term investments + Accounts receivable)/CurrentLiabilities
Smith & Sons,Inc Balance Sheet Decemober 31, 2016 and2015 (In millions) 2016 2015 Assets Current assets Cash and cash equivalents 200 400 Accounts receivable 900 800 Inventory 500 650 Other Current assets 400 250 Total Current assets 2000 2100 Property, plant &equipment (net) 2,600 2,500 Other Assets 5,700 5,900 Total assets 10,300 10,500 Labilities and Stockholders'eEquity Current Liabilites 3,000 2,900 Long-term liabilities 5,000 5,400 Total Labilities 8,000 8,300 Stockholders'sequity-common 2,300 2,200 Total Labilities andStockholders' Equity 10,300 10,500
Quick Ratio
Calculate the quick ration for Smith& Sons Inc for 2015 and 2016 and comment on the companyâsworking capital position. Did the companyâs ability to pay itscurrent liabilities improve over the two years?
Quick ratio = (cash and cashequivalents + Short term investments + Accounts receivable)/CurrentLiabilities
| Smith & Sons,Inc | ||||
| Balance Sheet | ||||
| Decemober 31, 2016 and2015 | ||||
| (In millions) | 2016 | 2015 | ||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 200 | 400 | ||
| Accounts receivable | 900 | 800 | ||
| Inventory | 500 | 650 | ||
| Other Current assets | 400 | 250 | ||
| Total Current assets | 2000 | 2100 | ||
| Property, plant &equipment (net) | 2,600 | 2,500 | ||
| Other Assets | 5,700 | 5,900 | ||
| Total assets | 10,300 | 10,500 | ||
| Labilities and Stockholders'eEquity | ||||
| Current Liabilites | 3,000 | 2,900 | ||
| Long-term liabilities | 5,000 | 5,400 | ||
| Total Labilities | 8,000 | 8,300 | ||
| Stockholders'sequity-common | 2,300 | 2,200 | ||
| Total Labilities andStockholders' Equity | 10,300 | 10,500 | ||
Related questions
| Current Ration |
| Calculate the current ratiofor Smith & Son Inc for 2015 and 2015 and comment on thecompanyâs working capital position. Did the companyâs ability topay its current liabilities improve over the two year? | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current ration = Current Assets/Currentliabilities
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The comparative financial statements of Bettancort Inc. are as follows. The market price of Bettancort Inc. common stock was $71.25 on December 31, 2016.
| Bettancort Inc. | ||||||
| Comparative Retained Earnings Statement | ||||||
| For the Years Ended December 31, 2016 and 2015 | ||||||
| 2016 | 2015 | |||||
| Retained earnings, January 1 | $2,655,000 | $2,400,000 | ||||
| Add net income for year | 300,000 | 280,000 | ||||
| Total | $2,955,000 | $2,680,000 | ||||
| Deduct dividends: | ||||||
| On preferred stock | $15,000 | $15,000 | ||||
| On common stock | 10,000 | 10,000 | ||||
| Total | $25,000 | $25,000 | ||||
| Retained earnings, December 31 | $2,930,000 | $2,655,000 | ||||
| Bettancort Inc. | ||||
| Comparative Income Statement | ||||
| For the Years Ended December 31, 2016 and 2015 | ||||
| 2016 | 2015 | |||
| Sales (all on account) | $1,212,000 | $1,010,000 | ||
| Sales returns and allowances | 12,000 | 10,000 | ||
| Sales | $1,200,000 | $1,000,000 | ||
| Cost of goods sold | 500,000 | 475,000 | ||
| Gross profit | $700,000 | $525,000 | ||
| Selling expenses | $240,000 | $200,000 | ||
| Administrative expenses | 180,000 | 150,000 | ||
| Total operating expenses | $420,000 | $350,000 | ||
| Income from operations | $280,000 | $175,000 | ||
| Other income | 166,000 | 225,000 | ||
| $446,000 | $400,000 | |||
| Other expense (interest) | 66,000 | 60,000 | ||
| Income before income tax | $380,000 | $340,000 | ||
| Income tax expense | 80,000 | 60,000 | ||
| Net income | $300,000 | $280,000 | ||
| Bettancort Inc. | |||||||
| Comparative Balance Sheet | |||||||
| December 31, 2016 and 2015 | |||||||
| Dec. 31, 2016 | Dec. 31, 2015 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash | $450,000 | $400,000 | |||||
| Marketable securities | 300,000 | 260,000 | |||||
| Accounts receivable (net) | 130,000 | 110,000 | |||||
| Inventories | 67,000 | 58,000 | |||||
| Prepaid expenses | 153,000 | 139,000 | |||||
| Total current assets | $1,100,000 | $967,000 | |||||
| Long-term investments | 2,350,000 | 2,200,000 | |||||
| Property, plant, and equipment (net) | 1,320,000 | 1,188,000 | |||||
| Total assets | $4,770,000 | $4,355,000 | |||||
| Liabilities | |||||||
| Current liabilities | $440,000 | $400,000 | |||||
| Long-term liabilities: | |||||||
| Mortgage note payable, 8%, due 2021 | $100,000 | $0 | |||||
| Bonds payable, 5%, due 2017 | 1,000,000 | 1,000,000 | |||||
| Total long-term liabilities | $1,100,000 | $1,000,000 | |||||
| Total liabilities | $1,540,000 | $1,400,000 | |||||
| Stockholders' Equity | |||||||
| Preferred $0.75 stock, $10 par | $200,000 | $200,000 | |||||
| Common stock, $10 par | 100,000 | 100,000 | |||||
| Retained earnings | 2,930,000 | 2,655,000 | |||||
| Total stockholders' equity | $3,230,000 | $2,955,000 | |||||
| Total liabilities and stockholders' equity | $4,770,000 | $4,355,000 | |||||
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 | $ | |
| 2. Current ratio | ||
| 3. Quick ratio | ||
| 4. Accounts receivable turnover | ||
| 5. Number of days' sales in receivables | days | |
| 6. Inventory turnover | ||
| 7. Number of days' sales in inventory | days | |
| 8. Ratio of fixed assets to long-term liabilities | ||
| 9. Ratio of liabilities to stockholders' equity | ||
| 10. Number of times interest charges are earned | ||
| 11. Number of times preferred dividends are earned | ||
| 12. Ratio of 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 | % |
