At December 31, 2014, Shorts Company had retained earnings of $ 2,184,000. During 2014, the company issued stock for $ 98,000, and paid dividends of $ 34,000. Net income for 2014 was $ 402,000. How much was the retained earnings balance at the beginning of 2014?
Question 6
The current ratio measures liquidity and higher means the company is more liquid. The debt to assets ratio measures solvency and higher is not always better. We don’ t know how many outstanding shares each company has so we cannot compare profitability.
The following ratios are available for Leer Inc. and Stable Inc.
Current Ratio |
Debt to Assets Ratio |
Earnings |
per Share |
|
|
Leer Inc. 2:1 75 % $ 3.50 Stable Inc. 1.5:1 40 % $ 2.75
Question 7
Solvency ratios are good indicators of a company’ s ability to survive over an extended period of time.