Question

Measures of liquidity, The ability of a company to make its periodic interest payments and repay the face amount of debt at maturity.Solvency, and The ability of a firm to generate earnings.Profitability

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			$1,711,500		$1,459,600
Net income			364,000		298,900
Total			$2,075,500		$1,758,500
Dividends:
	On preferred stock		$11,900		$11,900
	On common stock		35,100		35,100
		Total dividends	$47,000		$47,000
Retained earnings, December 31			$2,028,500		$1,711,500

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$2,222,850		$2,047,980
Cost of goods sold	740,950		681,670
Gross profit	$1,481,900		$1,366,310
Selling expenses	$518,280		$614,890
Administrative expenses	441,500		361,130
Total operating expenses	$959,780		$976,020
Income from operations	$522,120		$390,290
Other revenue	27,480		24,910
	$549,600		$415,200
Other expense (interest)	136,000		75,200
Income before income tax	$413,600		$340,000
Income tax expense	49,600		41,100
Net income	$364,000		$298,900

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$308,650		$339,300
	Marketable securities		467,150		562,260
	Accounts receivable (net)		394,200		372,300
	Inventories		292,000		219,000
	Prepaid expenses		58,400		67,860
		Total current assets	$1,520,400		$1,560,720
Long-term investments			1,404,900		409,910
Property, plant, and equipment (net)			2,040,000		1,836,000
Total assets			$4,965,300		$3,806,630
Liabilities
Current liabilities			$506,800		$425,130
Long-term liabilities:
	Mortgage note payable, 8%		$760,000		$0
	Bonds payable, 8%		940,000		940,000
		Total long-term liabilities	$1,700,000		$940,000
Total liabilities			$2,206,800		$1,365,130
Stockholders' Equity
Preferred $0.70 stock, $20 par			$340,000		$340,000
Common stock, $10 par			390,000		390,000
Retained earnings			2,028,500		1,711,500
Total stockholders' equity			$2,758,500		$2,441,500
Total liabilities and stockholders' equity			$4,965,300		$3,806,630

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 of part 1:

Working Capital = Current Assets – Current Liabilities
Working Capital = $1,520,400 - $506,800
Working Capital = $1,013,600

Answer of Part 2:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $1,520,400 / $506,800
Current Ratio = 3:1

Answer of Part 3:

Quick Ratio = (Current Assets – Inventory – Prepaid Expense) / Current Liabilities
Quick Ratio = ($1,520,400 - $292,000 - $58,400) / $506,800
Quick Ratio = $1,170,000 / $506,800
Quick Ratio = 2.3

Answer of Part 4:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) /2
Average Accounts Receivable = ($372,300 + $394,200) / 2
Average Accounts Receivable = $383,250

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $2,222,850 / $383,250
Accounts Receivable Turnover = 5.8 times

Answer of Part 5:

Number of Days Sales in Receivable = 365 days / Accounts Receivable Turnover
Number of Days Sales in Receivable = 365 / 5.8
Number of Days Sales in Receivable = 62.9 days