Question

17-3 17-04

Measures of liquidity, Solvency and Profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall 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			$ 3,512,350		$ 2,983,550
Net income			777,600		611,100
Total			$4,289,950		$ 3,594,650
Dividends:
	On preferred stock		$ 12,600		$ 12,600
	On common stock		69,700		69,700
		Total dividends	$ 82,300		$ 82,300
Retained earnings, December 31			$ 4,207,650		$ 3,512,350

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 4,592,430		$ 4,231,280
Cost of goods sold	1,810,400		1,665,570
Gross profit	$ 2,782,030		$ 2,565,710
Selling expenses	$ 888,950		$ 1,103,550
Administrative expenses	757,260		648,120
Total operating expenses	1,646,210		1,751,670
Income from operations	$ 1,135,820		$ 814,040
Other revenue	59,780		51,960
	$ 1,195,600		$ 866,000
Other expense (interest)	312,000		172,000
Income before income tax	$ 883,600		$ 694,000
Income tax expense	106,000		82,900
Net income	$ 777,600		$ 611,100

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Current assets
	Cash		$ 798,600		$ 732,730
	Marketable securities		1,208,690		1,214,230
	Accounts receivable (net)		876,000		824,900
	Inventories		657,000		511,000
	Prepaid expenses		151,077		146,550
		Total current assets	$ 3,691,367		$ 3,429,410
Long-term investments			2,549,168		723,011
Property, plant, and equipment (net)			4,680,000		4,212,000
Total assets			$ 10,920,535		$ 8,364,421
Liabilities
Current liabilities			$ 1,272,885		$ 1,162,071
Long-term liabilities
	Mortgage note payable, 8 %		$ 1,750,000		$ 0
	Bonds payable, 8 %		2,150,000		2,150,000
		Total long-term liabilities	$ 3,900,000		$ 2,150,000
Total liabilities			$ 5,172,885		$ 3,312,071
Stockholders' Equity
Preferred $ 0.70 stock, $ 40 par			$ 720,000		$ 720,000
Common stock, $ 10 par			820,000		820,000
Retained earnings			4,207,650		3,512,350
Total stockholders' equity			$ 5,747,650		$ 5,052,350
Total liabilities and stockholders' equity			$ 10,920,535		$ 8,364,421

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