Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 53 on December 31, 20Y2.

Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
			20Y2		20Y1
Retained earnings, January 1			$ 3,643,250		$ 3,089,750
Net income			772,800		632,800
Total			$ 4,257,450		$ 3,722,550
Dividends
	On preferred stock		$ 10,500		$ 10,500
	On common stock		68,800		68,800
		Total dividends	$ 79,300		$ 79,300
Retained earnings, December 31			$ 4,336,750		$ 3,643,250

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 4,474,170		$ 4,122,260
Cost of goods sold	1,708,200		1,571,540
Gross profit	$ 2,765,970		$ 2,550,720
Selling expenses	$ 895,360		$ 1,087,350
Administrative expenses	762,720		638,610
Total operating expenses	1,658,080		1,725,960
Income from operations	$ 1,107,890		$ 824,760
Other income	58,310		52,640
	$ 1,166,200		$ 877,400
Other expense (interest)	288,000		158,400
Income before income tax	$ 878,200		$ 719,000
Income tax expense	105,400		86,200
Net income	$ 772,800		$ 632,800

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Current assets
	Cash		$ 731,010		$ 751,950
	Marketable securities		1,106,390		1,246,100
	Accounts receivable (net)		854,100		803,000
	Inventories		642,400		496,400
	Prepaid expenses		138,300		150,390
		Total current assets	$ 3,472,200		$ 3,447,840
Long-term investments			3,271,950		1,397,524
Property, plant, and equipment (net)			3,960,000		3,564,000
Total assets			$ 10,704,150		$ 8,409,364
Liabilities
Current liabilities			$ 1,157,400		$ 1,176,114
Long-term liabilities
	Mortgage note payable, 8 %		$ 1,620,000		$ 0
	Bonds payable, 8 %		1,980,000		1,980,000
		Total long-term liabilities	$ 3,600,000		$ 1,980,000
Total liabilities			$ 4,757,400		$ 3,156,114
Stockholders' Equity
Preferred $ 0.70 stock, $ 50 par			$ 750,000		$ 750,000
Common stock, $ 10 par			860,000		860,000
Retained earnings			4,336,750		3,643,250
	Total stockholders' equity		$ 5,946,750		$ 5,253,250
Total liabilities and stockholders' equity			$ 10,704,150		$ 8,409,364

Required:

Determine the following measures for 20Y2, 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	$ 2314800
2. Current ratio	3
3. Quick ratio	2.3
4. Accounts receivable turnover	5.4
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. Times interest earned
11. Asset turnover
12. Return on total assets		%
13. Return on stockholders’ equity		%
14. Return on common stockholders’ equity		%
15. Earnings per share on common stock	$
16. Price-earnings ratio
17. Dividends per share of common stock	$
18. Dividend yield		%

Answer 1

Answer 5.

Number of days’ sales in receivables = 365 * Accounts receivable / Sales
Number of days’ sales in receivables = 365 * $854,100 / $4,474,170
Number of days’ sales in receivables = 69.7 days

Answer 6.

Average inventory = ($642,400 + $496,400) / 2
Average inventory = $569,400

Inventory turnover = Cost of goods sold / Average inventory
Inventory turnover = $1,708,200 / $569,400
Inventory turnover = 3.00

Answer 7.

Number of days’ sales in inventory = 365 * Inventories / Cost of goods sold
Number of days’ sales in inventory = 365 * $642,400 / $1,708,200
Number of days’ sales in inventory = 137.3 days

Answer 8.

Fixed Assets = Long-term investments + Property, plant and equipment (net)
Fixed Assets = $3,271,950 + $3,960,000
Fixed Assets = $7,231,950

Ratio of fixed assets to long-term liabilities = Fixed assets / Long-term liabilities
Ratio of fixed assets to long-term liabilities = $7,231,950 / $3,600,000
Ratio of fixed assets to long-term liabilities = 2.0

Answer 9.

Ratio of liabilities to stockholders’ equity = Total liabilities / Total stockholders’ equity
Ratio of liabilities to stockholders’ equity = $4,757,400 / $5,946,750
Ratio of liabilities to stockholders’ equity = 0.80