Question

Measures of liquidity, Solvency and Profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 62 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 $ 3,069,350 $ 2,579,650 Net income 720,000 528,400 Total $ 3,789,350 $ 3,108,050 Dividends On preferred stock $ 9,100 $ 9,100 On common stock 29,600 29,600 Total dividends $ 38,700 $ 38,700 Retained earnings, December 31 $ 3,750,650 $ 3,069,350 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $ 4,251,520 $ 3,917,180 Cost of goods sold 1,451,240 1,335,140 Gross profit $ 2,800,280 $ 2,582,040 Selling expenses $ 948,770 $ 1,179,930 Administrative expenses 808,220 692,970 Total operating expenses 1,756,990 1,872,900 Income from operations $ 1,043,290 $ 709,140 Other income 54,910 45,260 $ 1,098,200 $ 754,400 Other expense (interest) 280,000 154,400 Income before income tax $ 818,200 $ 600,000 Income tax expense 98,200 71,600 Net income $ 720,000 $ 528,400 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Current assets Cash $ 787,110 $ 699,480 Marketable securities 1,191,300 1,159,140 Accounts receivable (net) 781,100 737,300 Inventories 584,000 452,600 Prepaid expenses 148,904 139,900 Total current assets $ 3,492,414 $ 3,188,420 Long-term investments 2,074,821 808,205 Property, plant, and equipment (net) 4,200,000 3,780,000 Total assets $ 9,767,235 $ 7,776,625 Liabilities Current liabilities $ 1,126,585 $ 1,387,275 Long-term liabilities Mortgage note payable, 8 % $ 1,570,000 $ 0 Bonds payable, 8 % 1,930,000 1,930,000 Total long-term liabilities $ 3,500,000 $ 1,930,000 Total liabilities $ 4,626,585 $ 3,317,275 Stockholders' Equity Preferred $ 0.70 stock, $ 50 par $ 650,000 $ 650,000 Common stock, $ 10 par 740,000 740,000 Retained earnings 3,750,650 3,069,350 Total stockholders' equity $ 5,140,650 $ 4,459,350 Total liabilities and stockholders' equity $ 9,767,235 $ 7,776,625 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 $ 2,365,829 2. Current ratio 3.1 3. Quick ratio 2.4 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 1.2 9. Ratio of liabilities to stockholders' equity 10. Times interest earned 11. Asset turnover 0.6 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 for Requirement 1​ to 3 are Correct.

Answer to Requirement 4.

Accounts Receivable Turnover = Sales / Average Accounts Receivable

Average Accounts Receivable = ($781,100 + $737,300)/2

Average Accounts Receivable = $759,200

Accounts Receivable Turnover = $4,251,520/ $759,200

Accounts Receivable Turnover = 5.6 times

Answer to Requirement 5.

Number of days' Sales in Receivable = 365/ Accounts Receivable Turnover

Number of days' Sales in Receivable = 365/ 5.6

Number of days' Sales in Receivable = 65.2 days

Answer to Requirement 6.

Inventory Turnover = Cost of Goods sold/ Average Inventory

Average Inventory = ($584,000 + $452,600)/ 2

Average Inventory = $518,300

Inventory Turnover = $1,451,240/ $518,300

Inventory Turnover = 2.8 times

Answer to Requirement 7.

Number of days' Sales in Inventory = 365/ Inventory Turnover

Number of days'Sales in Inventory = 365/ 2.8

Number of days' sales in Inventory = 130.4 days