Question

Measures of liquidity, Solvency, and Profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 68 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			$4,225,075		$3,589,925
Net income			990,000		735,300
Total			$5,215,075		$4,325,225
Dividends:
	On preferred stock		$12,600		$12,600
	On common stock		87,550		87,550
		Total dividends	$100,150		$100,150
Retained earnings, December 31			$5,114,925		$4,225,075

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$5,721,375		$5,271,400
Cost of goods sold	2,195,110		2,019,500
Gross profit	$3,526,265		$3,251,900
Selling expenses	$1,130,070		$1,428,540
Administrative expenses	962,645		838,990
Total operating expenses	$2,092,715		$2,267,530
Income from operations	$1,433,550		$984,370
Other revenue	75,450		62,830
	$1,509,000		$1,047,200
Other expense (interest)	384,000		211,200
Income before income tax	$1,125,000		$836,000
Income tax expense	135,000		100,700
Net income	$990,000		$735,300

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$1,015,720		$971,100
	Marketable securities		1,537,310		1,609,240
	Accounts receivable (net)		1,073,100		1,007,400
	Inventories		803,000		613,200
	Prepaid expenses		192,169		194,220
		Total current assets	$4,621,299		$4,395,160
Long-term investments			3,004,059		1,140,745
Property, plant, and equipment (net)			5,760,000		5,184,000
Total assets			$13,385,358		$10,719,905
Liabilities
Current liabilities			$1,540,433		$1,924,830
Long-term liabilities:
	Mortgage note payable, 8%		$2,160,000		$0
	Bonds payable, 8%		2,640,000		2,640,000
		Total long-term liabilities	$4,800,000		$2,640,000
Total liabilities			$6,340,433		$4,564,830
Stockholders' Equity
Preferred $0.70 stock, $50 par			$900,000		$900,000
Common stock, $10 par			1,030,000		1,030,000
Retained earnings			5,114,925		4,225,075
Total stockholders' equity			$7,044,925		$6,155,075
Total liabilities and stockholders' equity			$13,385,358		$10,719,905

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

Solution:

1.) Working capital = Current assets - Current liabilities

=4,621,299 - 1,540,433

= 3,080,866

2.) Current ratio =Current assets / Current liabilities

= 4,621,299 / 1,540,433

= 3

3.)

Quick ratio = [( Current assets - Inventories) / Current liabilities

= [(4,621,299 - 803,000) /1,540,433)]

= 3,818,299/803,000

= 2.4

4.)

Accounts receivable turnover = (Sales /Average Accounts Receivable)

Average accounts receivable = (Opening Accounts Receivable + Closing Accounts Receivable) /2

= (1,007,400 + 1,073,100) /2

= 2,080,500 /2 =1040,250

Accounts Receivable turnover = 5,721,375/1,040,250

= 5.5

5.) Number of days' sales in receivable = (365 days /Accounts receivable turnover)

= 365/5.5

= 66 days

6.) Inventory turnover = ( Cost of goods sold / Average inventory)

Average inventory = (opening stock + closing stock ) /2

= (613,200 + 803,000) /2

= 1,416,200/2 = 708,100

Inventory turnover = 2,195,110 / 708,100

= 3.1

7.) No.of days sales in inventory = ( 365 /Inventory turnover ratio)

= 365/3.1

= 118 days

8.) Ratio of fixed assets to long term liabilities = (Fixed assets / long term liabilities)

= 5,760,000 / 4,800,000

= 1.2

9.) Ratio of liabilities to stockholders'equity =Total liabilities / stockholders'equity

= 6,340,433 / 7,044,925

= 0.9

10.) Time interest earned = Total operating income / Interest expenses

= 1,,509,000/384,000

= 3.9

Please post the rest part separately.