1) What is the advantage of using comparative statements forfinancial analysis rather than statements for a single date orperiod?

2)What do the following data taken from a comparative balancesheet indicate about the company's ability to borrow additionalfunds on a long-term basis in the current year as compared to thepreceding year?

currentyear Preceding year

fixedassets(net) 600,000 720,000

total long termliabilities 120,000 180,000

3)a. How does the rate earned on total assets differ from therate earned on stockholders' equity?

b. Which ratio is normally higher? Explain.

4)The net income (after income tax) of McCants Inc. was $40 percommon share in the latest year and $100 per common share for thepreceding year. At the beginning of the latest year, the number ofshares outstanding was doubled by a stock split. There were noother changes in the amount of stock outstanding. What were theearnings per share in the preceding year, adjusted for comparisonwith the latest year?

5) Describe two reports provided by independent auditors in theannual report to shareholders.

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Beverley SmithLv2

28 Sep 2019

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Nineteen Measures of Solvency and Profitability

The comparative financial statements of Blige Inc. are asfollows. The market price of Blige Inc. common stock was $59 onDecember 31, 2014.

Blige Inc.
Comparative Retained EarningsStatement
For the Years Ended December 31, 2014 and2013
			2014	2013
Retained earnings, January 1			$1,409,100	$1,196,600
Add net income for year			334,400	245,100
Total			$1,743,500	$1,441,700
Deduct dividends
	On preferred stock		$10,500	$10,500
	On common stock		22,100	22,100
		Total	$32,600	$32,600
Retained earnings, December 31			$1,710,900	$1,409,100

Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2014 and2013
	2014	2013
Sales	$2,021,210	$1,859,500
Sales returns and allowances	10,060	6,540
Net sales	$2,011,150	$1,852,960
Cost of goods sold	747,520	687,720
Gross profit	$1,263,630	$1,165,240
Selling expenses	$421,760	$527,180
Administrative expenses	359,270	309,620
Total operating expenses	781,030	836,800
Income from operations	$482,600	$328,440
Other income	25,400	20,960
	$508,000	$349,400
Other expense (interest)	128,000	70,400
Income before income tax	$380,000	$279,000
Income tax expense	45,600	33,900
Net income	$334,400	$245,100

Blige Inc.
Comparative Balance Sheet
December 31, 2014 and 2013
			Dec. 31,2014	Dec. 31,2013
Assets
Current assets
	Cash		$323,880	$344,370
	Temporary investments		490,200	570,680
	Accounts receivable (net)		357,700	335,800
	Inventories		262,800	204,400
	Prepaid expenses		61,269	68,870
		Total current assets	$1,495,849	$1,524,120
Long-term investments			890,861	321,241
Property, plant, and equipment (net)			2,080,000	1,872,000
Total assets			$4,466,710	$3,717,361
Liabilities
Current liabilities			$515,810	$788,261
Long-term liabilities
	Mortgage note payable, 8%, due 2019		$720,000	$0
	Bonds payable, 8%, due 2015		880,000	880,000
		Total long-term liabilities	$1,600,000	$880,000
Total liabilities			$2,115,810	$1,668,261
Stockholders' Equity
Preferred $0.70 stock, $20 par			$300,000	$300,000
Common stock, $10 par			340,000	340,000
Retained earnings			1,710,900	1,409,100
	Total stockholders' equity		$2,350,900	$2,049,100
Total liabilities and stockholders' equity			$4,466,710	$3,717,361

Required:

Determine the following measures for 2014, rounding to onedecimal place, except for dollar amounts, which should be roundedto the nearest cent. Use the rounded answer of the requirement forsubsequent requirement, if required. Assume 365 days a year.

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		%

pucelion39

Nineteen Measures of Solvency and Profitability

The comparative financial statements of Blige Inc. are asfollows. The market price of Blige Inc. common stock was $59 onDecember 31, 2014.

Blige Inc.
Comparative Retained EarningsStatement
For the Years Ended December 31, 2014 and2013
			2014	2013
Retained earnings, January 1			$1,409,100	$1,196,600
Add net income for year			334,400	245,100
Total			$1,743,500	$1,441,700
Deduct dividends
	On preferred stock		$10,500	$10,500
	On common stock		22,100	22,100
		Total	$32,600	$32,600
Retained earnings, December 31			$1,710,900	$1,409,100

Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2014 and2013
	2014	2013
Sales	$2,021,210	$1,859,500
Sales returns and allowances	10,060	6,540
Net sales	$2,011,150	$1,852,960
Cost of goods sold	747,520	687,720
Gross profit	$1,263,630	$1,165,240
Selling expenses	$421,760	$527,180
Administrative expenses	359,270	309,620
Total operating expenses	781,030	836,800
Income from operations	$482,600	$328,440
Other income	25,400	20,960
	$508,000	$349,400
Other expense (interest)	128,000	70,400
Income before income tax	$380,000	$279,000
Income tax expense	45,600	33,900
Net income	$334,400	$245,100

Blige Inc.
Comparative Balance Sheet
December 31, 2014 and 2013
			Dec. 31,2014	Dec. 31,2013
Assets
Current assets
	Cash		$323,880	$344,370
	Temporary investments		490,200	570,680
	Accounts receivable (net)		357,700	335,800
	Inventories		262,800	204,400
	Prepaid expenses		61,269	68,870
		Total current assets	$1,495,849	$1,524,120
Long-term investments			890,861	321,241
Property, plant, and equipment (net)			2,080,000	1,872,000
Total assets			$4,466,710	$3,717,361
Liabilities
Current liabilities			$515,810	$788,261
Long-term liabilities
	Mortgage note payable, 8%, due 2019		$720,000	$0
	Bonds payable, 8%, due 2015		880,000	880,000
		Total long-term liabilities	$1,600,000	$880,000
Total liabilities			$2,115,810	$1,668,261
Stockholders' Equity
Preferred $0.70 stock, $20 par			$300,000	$300,000
Common stock, $10 par			340,000	340,000
Retained earnings			1,710,900	1,409,100
	Total stockholders' equity		$2,350,900	$2,049,100
Total liabilities and stockholders' equity			$4,466,710	$3,717,361

Required:

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-termliabilities
9. Ratio of liabilities to stockholders'equity
10. Number of times interest charges areearned
11. Number of times preferred dividends areearned
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		%

aquamarinegnat75

EXERCISE 15-2 Financial Ratios for Assessing Liquidity (L015-2] Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock dur ing the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.40. The market value of the company's common stock at the end of the year was $18. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash................... Accounts receivable, net ......... Inventory ..................... Prepaid expenses .............. Total current assets ............... Property and equipment: Land ............ Buildings and equipment, net ........ Total property and equipment. Total assets ........ $ 1,280 12,300 9,700 1,800 25,080 $ 1,560 9,100 8,200 2,100 20,960 6,000 19,200 25,200 $50,280 6,000 19,000 25,000 $45,960 .... $ 9,500 600 300 10,400 $ 8,300 700 300 9,300 Liabilities and Stockholders' Equity Current liabilities: Accounts payable.. Accrued liabilities .......... Notes payable, short term ........ Total current liabilities ......... Long-term liabilities: Bonds payable ............ Total liabilities .............................. Stockholders' equity: Common stock ... Additional paid-in capital ...... Total paid-in capital ............... Retained earnings ........ . Total stockholders' equity .. Total liabilities and stockholders' equity .......... 5,000 15,400 5,000 14,300 800 4,200 800 4,200 5,000 29,880 34,880 $50,280 5,000 26,660 31,660 $45,960 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales ...... $79,000 $74,000 Cost of goods sold .................... 52,000 48,000 Gross margin .......................... 27,000 26,000 Selling and administrative expenses: Selling expenses 8,500 8.000 Administrative expenses .... 12,000 11,000 Total selling and administrative expenses .... 20,500 19,000 rating income.................... 6,500 Interest expense ........................ 600 600 Net income before taxes ................. 5,900 6,400 Income taxes .......................... 2,360 2,560 Net income ............ .......... 3,540 3,840 Dividends to common stockholders ......... 320 Net income added to retained earings...... 3,220 3,240 Beginning retained earnings 26,660 23,420 Ending retained earnings ................. $29,880 $26,660 7,000 320 EXERCISE 15-6 Financial Ratios for Assessing Market Performance (L015-6] Refer to the data in Exercise 15-2 for Weller Corporation. Required: Compute the following financial data for this year: 1. Earnings per share. 2. Price-earnings ratio. 3. Dividend payout ratio. 4. Dividend yield ratio. 5. Book value per share.

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