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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. The excess of the current assets of a business over its current liabilities.Working capital | $[removed][removed] | |
| 2. A financial ratio that is computed by dividing current assets by current liabilities.Current ratio | [removed][removed] | |
| 3. A financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).Quick ratio | [removed][removed] | |
| 4. The relationship between sales and accounts receivable, computed by dividing the net sales by the average net accounts receivable; measures how frequently during the year the accounts receivable are being converted to cash.Accounts receivable turnover | [removed][removed] | |
| 5. The relationship between sales and accounts receivable, computed by dividing the average accounts receivable by the average daily sales.Number of days’ sales in receivables | [removed][removed] | days |
| 6. The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory.Inventory turnover | [removed][removed] | |
| 7. The relationship between the volume of sales and inventory, computed by dividing average inventory by the average daily cost of goods sold.Number of days’ sales in inventory | [removed][removed] | days |
| 8. The ratio of fixed assets to long-term liabilities provides a measure of whether note-holders or bondholders will be paid.Ratio of fixed assets to long-term liabilities | [removed][removed] | |
| 9. The ratio of liabilities to stockholders’ equity measures how much of the company is financed by debt and equity.Ratio of liabilities to stockholders’ equity | [removed][removed] | |
| 10. A ratio that measures creditor margin of safety for interest payments, calculated as income before income tax + interest expense divided by interest expense.Number of times interest charges are earned | [removed][removed] | |
| 11. A ratio that measures the risk that preferred dividends will not be paid if earnings decrease, calculated by dividing net income by the amount of preferred dividends.Number of times preferred dividends are earned | [removed][removed] | |
| 12. Ratio that measures how effectively a company uses its assets, computed as sales divided by average total assets.Ratio of sales to assets | [removed][removed] | |
| 13. A measure of profitability of assets, without regard to the portion of assets financed by creditors or stockholders.Rate earned on total assets | [removed][removed] | % |
| 14. A measure of profitability computed by dividing net income by average stockholders’ equity.Rate earned on stockholders’ equity | [removed][removed] | % |
| 15. A measure of profitability computed by dividing net income, reduced by preferred dividend requirements, by average common stockholders’ equity.Rate earned on common stockholders’ equity | [removed][removed] | % |
| 16. The profitability ratio of net income available to common shareholders to the number of common shares outstanding.Earnings per share on common stock | $[removed][removed] | |
| 17. The ratio of the market price per share of common stock, at a specific date, to the annual earnings per share.Price-earnings ratio | [removed][removed] | |
| 18. Measures the extent to which earnings are being distributed to common shareholders.Dividends per share of common stock | $[removed][removed] | |
| 19. A ratio, computed by dividing the annual dividends paid per share of common stock by the market price per share at a specific date, that indicates the rate of return to stockholders in terms of cash dividend distributions.Dividend yield | [removed][removed] | % |
