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 $ 53 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			$1,811,175		$1,541,125
Net income			403,200		315,600
Total			$2,214,375		$1,856,725
Dividends:
	On preferred stock		$13,300		$13,300
	On common stock		32,250		32,250
		Total dividends	$45,550		$45,550
Retained earnings, December 31			$2,168,825		$1,811,175

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$2,496,600		$2,300,290
Cost of goods sold	897,900		826,070
Gross profit	$1,598,700		$1,474,220
Selling expenses	$546,160		$664,050
Administrative expenses	465,250		389,990
Total operating expenses	$1,011,410		$1,054,040
Income from operations	$587,290		$420,180
Other revenue	30,910		26,820
	$618,200		$447,000
Other expense (interest)	160,000		88,000
Income before income tax	$458,200		$359,000
Income tax expense	55,000		43,400
Net income	$403,200		$315,600

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$489,330		$390,850
	Marketable securities		740,610		647,700
	Accounts receivable (net)		452,600		423,400
	Inventories		335,800		262,800
	Prepaid expenses		92,583		78,170
		Total current assets	$2,110,923		$1,802,920
Long-term investments			1,348,845		614,455
Property, plant, and equipment (net)			2,200,000		1,980,000
Total assets			$5,659,768		$4,397,375
Liabilities
Current liabilities			$680,943		$676,200
Long-term liabilities:
	Mortgage note payable, 8%		$900,000		$0
	Bonds payable, 8%		1,100,000		1,100,000
		Total long-term liabilities	$2,000,000		$1,100,000
Total liabilities			$2,680,943		$1,776,200
Stockholders' Equity
Preferred $0.70 stock, $20 par			$380,000		$380,000
Common stock, $10 par			430,000		430,000
Retained earnings			2,168,825		1,811,175
Total stockholders' equity			$2,978,825		$2,621,175
Total liabilities and stockholders' equity			$5,659,768		$4,397,375

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

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Marshall
Statement of Earnings	20Y2	20Y1
Sales	2,496,600.00	2,300,290.00
Cost of goods sold	897,900.00	826,070.00
Gross Profit	1,598,700.00	1,474,220.00
Selling expenses	546,160.00	664,050.00
Administrative expenses	465,250.00	389,990.00
Total operating expenses	1,011,410.00	1,054,040.00
Income from operations	587,290.00	420,180.00
Other revenue	30,910.00	26,820.00
	618,200.00	447,000.00
Other expense (interest)	160,000.00	88,000.00
Income before income tax	458,200.00	359,000.00
Income tax expense	55,000.00	43,400.00
Net Income	403,200.00	315,600.00
Preferred stock Dividend	13,300.00	13,300.00
Net Income - available for common stockholder	389,900.00	302,300.00
Statement of Financial Position
Assets	20Y2	20Y1
Cash	489,330.00	390,850.00
Marketable securities	740,610.00	647,700.00
Accounts Receivable (Net)	452,600.00	423,400.00
Inventory	335,800.00	262,800.00
Prepaid expenses	92,583.00	78,170.00
Total Current Assets	2,110,923.00	1,802,920.00
Long-term investments	1,348,845.00	614,455.00
Property Assets (Net)	2,200,000.00	1,980,000.00
Total Assets	5,659,768.00	4,397,375.00
Liabilities
Current Liabilities	680,943.00	676,200.00
Long Term- Liabilities
Mortgage note payable, 8%	900,000.00	-
Bonds Payable, 8%	1,100,000.00	1,100,000.00
Total Long Term- Liabilities	2,000,000.00	1,100,000.00
Total Liabilities	2,680,943.00	1,776,200.00
Stockholders' Equity
Preferred $0.70 stock, $20 par	380,000.00	380,000.00
Common Stock, $ 10 par	430,000.00	430,000.00
Retained Earnings	2,168,825.00	1,811,175.00
Total Stockholders' Equity	2,978,825.00	2,621,175.00
Total Liabilities & Stockholders' Equity	5,659,768.00	4,397,375.00
Total Current Assets	2,110,923.00
Less: Inventory	335,800.00
Prepaid expenses	92,583.00
Quick Assets	1,682,540.00
	20Y2	20Y1
Accounts Receivable (Net)	452,600.00	423,400.00
Average Accounts Receivable (Net)	438,000.00
Inventory	335,800.00	262,800.00
Average Inventory	299,300.00
Total Assets	5,659,768.00	4,397,375.00
Average Total Assets	5,028,571.50

Common Stock, $ 10 par	430,000.00
Retained Earnings	2,168,825.00
Total Common Stockholders' Equity	2,598,825.00
Common Stock, $ 10 par	430,000.00
Par Value	10.00
Number of shares in Common Stock	43,000.00
Market price per share	53.00
Common Stock dividends	32,250.00

Ans 1- Working capital	20Y2
Current Assets- Current Liabilities	1,429,980.00
Ans 2- Current Ratio
Current Assets/Current Liabilities	3.10
Ans 3- Acid Test Ratio
Quick Assets/Quick Liabilities	2.47
Ans 4- Accounts Receivables Turnover
Sales Revenue/Average Accounts Receivable	5.70
Ans 5- Number of days' sales in receivables
365/ Accounts Receivables Turnover	64.04
Ans 6- Inventory Turnover
Cost of goods sold/Average Inventory	3.00
Ans 7- Number of days' sales in inventory
365/ Inventory Turnover	121.67
Ans 8- Ratio of fixed assets to long-term liabilities
Property Assets (Net)/ long-term liabilities	1.10
Ans 9- Ratio of liabilities to stockholders' equity
Total Liabilities/ Stockholders' equity	0.90
Ans 10- Times interest earned
Income from operations/ Interest	3.67
Ans 11- Asset turnover
Sales Revenue/Average Total Assets	0.50
Ans 12- Return on Total Assets
Net Income /Average Total Assets	8.02%
Ans 13- Return on stockholders’ equity
Net Income / Total stockholders’ equity	13.54%
Ans 14- Return on Common stockholders’ equity
Net Income - available for common stockholder / Total Common stockholders’ equity	15.00%
Ans 15- Earnings Per share on Common Stock
Net Income - available for common stockholder /Number of shares in Common Stock	9.07
Ans 16- Price Earnings Ratio
Market Price/ Earnings Per share on Common Stock	5.85
Ans 17- Dividend Per share on Common Stock
Common Dividend/ Number of shares in Common Stock	0.75
Ans 18- Dividend Yield
Dividend Per share on Common Stock/ Market Price	1.42%