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 $ 1,262,500 $ 1,071,900
Net income 304,000 219,600
Total $ 1,508,500 $ 1,291,500
Dividends
On preferred stock $ 9,800 $ 9,800
On common stock 19,200 19,200
Total dividends $ 29,000 $ 29,000
Retained earnings, December 31 $ 1,537,500 $ 1,262,500

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
   20Y2    20Y1
Sales $ 1,810,035 $ 1,667,720
Cost of goods sold 613,200 564,140
Gross profit $ 1,196,835 $ 1,103,580
Selling expenses $ 407,490 $ 507,880
Administrative expenses 347,125 298,280
Total operating expenses 754,615 806,160
Income from operations $ 442,220 $ 297,420
Other income 23,280 18,980
$ 465,500 $ 316,400
Other expense (interest) 120,000 66,400
Income before income tax $ 345,500 $ 250,000
Income tax expense 41,500 30,400
Net income $ 304,000 $ 219,600

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
   Dec. 31, 20Y2    Dec. 31, 20Y1
Assets
Current assets
Cash $ 272,660 $ 329,970
Marketable securities 412,680 546,810
Accounts receivable (net) 328,500 306,600
Inventories 248,200 189,800
Prepaid expenses 51,585 65,990
Total current assets $ 1,313,625 $ 1,439,170
Long-term investments 797,625 316,009
Property, plant, and equipment (net) 1,950,000 1,755,000
Total assets $ 4,061,250 $ 3,510,179
Liabilities
Current liabilities $ 423,750 $ 817,679
Long-term liabilities
Mortgage note payable, 8 % $ 670,000 $ 0
Bonds payable, 8 % 830,000 830,000
Total long-term liabilities $ 1,500,000 $ 830,000
Total liabilities $ 1,923,750 $ 1,647,679
Stockholders' Equity
Preferred $ 0.70 stock, $ 20 par $ 280,000 $ 280,000
Common stock, $ 10 par 320,000 320,000
Retained earnings 1,537,500 1,262,500
Total stockholders' equity $ 2,137,500 $ 1,862,500
Total liabilities and stockholders' equity $ 4,061,250 $ 3,510,179

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

1)	Working Capital		=	Current Assets - Current Liabilities
			=	$ 13,13,625.00	-	$ 4,23,750.00
			=	$    8,89,875.00
2)	Current Ratio		=	Current Assets / Current Liabilities
			=	$       13,13,625	/	$       4,23,750
			=	3.1
3)	Quick ratio		=	Quick Assets /Current Liabilities
			=	(Current Assets -Inventories - Prepaid Expense)/Current Liabilities
			=	(1313625-248200-51585)		/	$ 4,23,750
			=	$       10,13,840		/	$ 4,23,750
			=	2.4
4)	Accounts receivable Turnover			=	Sales / Average Accounts receivable
				=	$       18,10,035	/	$ 3,17,550
				=	5.7
	Working:
	Average Accounts receivable			=	(328500+306600)/2
				=	$          3,17,550