FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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  1. For each individual ratio for each company, Your comments for each ratio should include more than just a definition or increase or decrease of the ratio. You should focus on interpreting each ratio numberfor the company and support your comments.
  2. Use the ratio results by category to form and support conclusion by Liquidity, Solvency and Profitability. Then use to complete the  Overall Conclusion as to the financial results of the company (ratios described in the chapters covered and summarized in Chapter 14 of your textbook). Conclude by stating whether the company is the better employment /investment opportunity and why.
Stargel Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
      20Y2     20Y1
Assets  
Current assets:    
  Cash $500,000   $400,000  
  Marketable securities 1,010,000   1,000,000  
  Accounts receivable (net) 740,000   510,000  
  Inventories 1,190,000   950,000  
  Prepaid expenses 250,000   229,000  
    Total current assets $3,690,000   $3,089,000  
Long-term investments 2,350,000   2,300,000  
Property, plant, and equipment (net) 3,740,000   3,366,000  
Total assets $9,780,000   $8,755,000  
Liabilities
Current liabilities $900,000   $880,000  
Long-term liabilities:    
  Mortgage note payable, 10% $200,000   $0  
  Bonds payable, 10% 1,500,000   1,500,000  
    Total long-term liabilities $1,700,000   $1,500,000  
Total liabilities $2,600,000   $2,380,000  
Stockholders' Equity    
Preferred $0.90 stock, $10 par $500,000   $500,000  
Common stock, $5 par 500,000   500,000  
Retained earnings 6,180,000   5,375,000  
  Total stockholders' equity $7,180,000   $6,375,000  
Total liabilities and stockholders' equity $9,780,000   $8,755,000  

Required:

Determine the following measures for 20Y2, rounding to one decimal place, except 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 $2,790,000  
2. Current ratio 4.1  
3. Quick ratio 2.5  
4. Accounts receivable turnover 16  
5. Number of days' sales in receivables 22.8 days
6. Inventory turnover 5  
7. Number of days' sales in inventory 73 days
8. Ratio of fixed assets to long-term liabilities 2.2  
9. Ratio of liabilities to stockholders' equity 0.4  
10. Times interest earned 7.6  
11. Asset turnover 1.1  
12. Return on total assets 11.50 %
13. Return on stockholders’ equity 13.30 %
14. Return on common stockholders’ equity 13.60 %
15. Earnings per share on common stock $8.55  
16. Price-earnings ratio 14  
17. Dividends per share of common stock $0.50  
18. Dividend yield 0.40 %

 

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