Question

Measures of liquidity, The ability of a company to make its periodic interest payments and repay the face amount of debt at maturity.Solvency, and The ability of a firm to generate earnings.Profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 61 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			$ 1,654,075		$ 1,400,225
Net income			384,800		286,800
Total			$2,038,875		$ 1,687,025
Dividends:
	On preferred stock		$ 6,300		$ 6,300
	On common stock		26,650		26,650
		Total dividends	$ 32,950		$ 32,950
Retained earnings, December 31			$ 2,005,925		$ 1,654,075

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 2,144,740		$ 1,976,030
Cost of goods sold	825,630		759,580
Gross profit	$ 1,319,110		$ 1,216,450
Selling expenses	$ 410,010		$ 523,560
Administrative expenses	349,270		307,490
Total operating expenses	$759,280		$831,050
Income from operations	$ 559,830		$ 385,400
Other revenue	29,470		24,600
	$ 589,300		$ 410,000
Other expense (interest)	152,000		84,000
Income before income tax	$ 437,300		$ 326,000
Income tax expense	52,500		39,200
Net income	$ 384,800		$ 286,800

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$ 410,790		$ 416,310
	Marketable securities		621,730		689,880
	Accounts receivable (net)		423,400		401,500
	Inventories		321,200		248,200
	Prepaid expenses		77,712		83,260
		Total current assets	$ 1,854,832		$ 1,839,150
Long-term investments			1,329,426		765,592
Property, plant, and equipment (net)			2,090,000		1,881,000
Total assets			$ 5,274,258		$ 4,485,742
Liabilities
Current liabilities			$ 598,333		$ 1,011,667
Long-term liabilities:
	Mortgage note payable, 8%		$ 850,000		$ 0
	Bonds payable, 8%		1,050,000		1,050,000
		Total long-term liabilities	$ 1,900,000		$ 1,050,000
Total liabilities			$ 2,498,333		$ 2,061,667
Stockholders' Equity
Preferred $0.70 stock, $40 par			$ 360,000		$ 360,000
Common stock, $10 par			410,000		410,000
Retained earnings			2,005,925		1,654,075
Total stockholders' equity			$ 2,775,925		$ 2,424,075
Total liabilities and stockholders' equity			$ 5,274,258		$ 4,485,742

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

10. A ratio that measures the risk that interest payments will not be made if earnings decrease, calculated as income before income tax and interest expense divided by interest expense.Times interest earned
11. Ratio that measures how effectively a business uses its assets to generate revenues, computed as sales divided by average total assets.Asset turnover
12. A measure of the profitability of assets, without regard to the equity of creditors and stockholders in the assets.Return on total assets		%
13. A measure of profitability computed by dividing net income by average total stockholders’ equity.Return on stockholders’ equity		%
14. A measure of profitability computed by dividing net income, reduced by preferred dividend requirements, by average common stockholders' equity.Return on common stockholders’ equity		%

Answer 1

Question 10 Answer:

Question 11 and 12 Answers:

Question 13 Answers:

Question 14 Answers: