Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 54 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			$ 2,821,050		$ 2,378,450
Net income			642,400		487,100
Total			$3,463,450		$ 2,865,550
Dividends:
	On preferred stock		$ 10,500		$ 10,500
	On common stock		34,000		34,000
		Total dividends	$ 44,500		$ 44,500
Retained earnings, December 31			$ 3,418,950		$ 2,821,050

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 4,091,650		$ 3,769,800
Cost of goods sold	1,423,500		1,309,620
Gross profit	$ 2,668,150		$ 2,460,180
Selling expenses	$ 934,980		$ 1,138,450
Administrative expenses	796,470		668,620
Total operating expenses	$1,731,450		$1,807,070
Income from operations	$ 936,700		$ 653,110
Other revenue	49,300		41,690
	$ 986,000		$ 694,800
Other expense (interest)	256,000		140,800
Income before income tax	$ 730,000		$ 554,000
Income tax expense	87,600		66,900
Net income	$ 642,400		$ 487,100

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$ 715,750		$ 663,580
	Marketable securities		1,083,300		1,099,650
	Accounts receivable (net)		715,400		671,600
	Inventories		540,200		408,800
	Prepaid expenses		135,421		132,720
		Total current assets	$ 3,190,071		$ 2,976,350
Long-term investments			1,577,934		539,032
Property, plant, and equipment (net)			4,160,000		3,744,000
Total assets			$ 8,928,005		$ 7,259,382
Liabilities
Current liabilities			$ 1,029,055		$ 1,398,332
Long-term liabilities:
	Mortgage note payable, 8%		$ 1,440,000		$ 0
	Bonds payable, 8%		1,760,000		1,760,000
		Total long-term liabilities	$ 3,200,000		$ 1,760,000
Total liabilities			$ 4,229,055		$ 3,158,332
Stockholders' Equity
Preferred $0.70 stock, $40 par			$ 600,000		$ 600,000
Common stock, $10 par			680,000		680,000
Retained earnings			3,418,950		2,821,050
Total stockholders' equity			$ 4,698,950		$ 4,101,050
Total liabilities and stockholders' equity			$ 8,928,005		$ 7,259,382

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	$
2. Current ratio
3. Quick ratio
4. Accounts receivable turnover
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 1.

Working Capital = Current Assets - Current Liabilities
Working Capital = $3,190,071 - $1,029,055
Working Capital = $2,161,016

Answer 2.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $3,190,071 / $1,029,055
Current Ratio = 3.1

Answer 3.

Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities
Quick Ratio = ($3,190,071 - $540,200 - $135,421) / $1,029,055
Quick Ratio = 2.4

Answer 4.

Average Accounts Receivable = ($715,400 + $671,600) / 2
Average Accounts Receivable = $693,500

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $4,091,650 / $693,500
Accounts Receivable Turnover = 5.9

Answer 5.

Number of days’ sales in receivables = 365 / Accounts Receivable Turnover
Number of days’ sales in receivables = 365 / 5.9
Number of days’ sales in receivables = 61.9 days

Answer 6.

Average inventory = ($540,200 + $408,800) / 2
Average inventory = $474,500

Inventory turnover = Cost of goods sold / Average inventory
Inventory turnover = $1,423,500 / $474,500
Inventory turnover = 3.0

Answer 7.

Number of days’ sales in inventory = 365 / Inventory Turnover
Number of days’ sales in inventory = 365 / 3.0
Number of days’ sales in inventory = 121.7 days