Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 51 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			$ 4,526,050		$ 3,821,450
Net income			966,000		782,700
Total			$ 5,335,850		$ 4,604,150
Dividends
	On preferred stock		$ 13,300		$ 13,300
	On common stock		64,800		64,800
		Total dividends	$ 78,100		$ 78,100
Retained earnings, December 31			$ 5,413,950		$ 4,526,050

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 5,617,350		$ 5,175,540
Cost of goods sold	2,124,300		1,954,360
Gross profit	$ 3,493,050		$ 3,221,180
Selling expenses	$ 1,138,450		$ 1,385,380
Administrative expenses	969,790		813,640
Total operating expenses	2,108,240		2,199,020
Income from operations	$ 1,384,810		$ 1,022,160
Other income	72,890		65,240
	$ 1,457,700		$ 1,087,400
Other expense (interest)	360,000		198,400
Income before income tax	$ 1,097,700		$ 889,000
Income tax expense	131,700		106,300
Net income	$ 966,000		$ 782,700

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Current assets
	Cash		$ 867,230		$ 877,820
	Marketable securities		1,312,560		1,454,690
	Accounts receivable (net)		1,073,100		1,007,400
	Inventories		803,000		613,200
	Prepaid expenses		164,074		175,560
		Total current assets	$ 4,219,964		$ 4,128,670
Long-term investments			3,779,146		1,081,247
Property, plant, and equipment (net)			5,400,000		4,860,000
Total assets			$ 13,399,110		$ 10,069,917
Liabilities
Current liabilities			$ 1,455,160		$ 1,033,867
Long-term liabilities
	Mortgage note payable, 8 %		$ 2,020,000		$ 0
	Bonds payable, 8 %		2,480,000		2,480,000
		Total long-term liabilities	$ 4,500,000		$ 2,480,000
Total liabilities			$ 5,955,160		$ 3,513,867
Stockholders' Equity
Preferred $ 0.70 stock, $ 50 par			$ 950,000		$ 950,000
Common stock, $ 10 par			1,080,000		1,080,000
Retained earnings			5,413,950		4,526,050
	Total stockholders' equity		$ 7,443,950		$ 6,556,050
Total liabilities and stockholders' equity			$ 13,399,110		$ 10,069,917

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
Current assets: $ 4,219,964
Current Liabilities: $1,455,160
Working capital= $4,219,964 - $1,455,160 = $ 2,764,804
2 Current Ratio: Current Assets/ Current Liabilities
	($ 4,219,964 /1,455,160) = 2.9
3. Quick ratio: Liquid Assets/ Current liabilities
Liquid assets: Current assets- Inventory- prepaid expense
	(4,219,964 -803,000 -164,074) = $3,252,890
Quick ratio: $ 3,252,890 /1,455,160 = 2.24
4. Accounts recievable turnover: Net sales/ Average accounts recievable
Average accounts recievable (1,073,100+1,007,400)/2 = $1,040,250
Net sales: $ 5,617,350
Accounts recievable turnover: $ 5,617,350 /1,040,250 = 5.4 times
5. Number of days sales in recievable: Number of days/ Accounts recievbale turnover
			(365 / 5.4) = 67.59 days
6. Inventory Turnover: COGS / Average Inventory
Average inventory (803,000+613,200)/2 = 708,000
COGS: $ 2,124,300
Inventory turnover ratio: $ 2,124,300 /708,000 =3 times
7. Number of days salae sin inventory: Number of days / Inventory turnover ratio
			( 365 days / 3 times) = 121.67 days
8. Ratio of fixed assets to long term liabilities: Fixed assets / Long term liabilities
				(5,400,000/3,779,146) = 1.43
9. ratio to liabilities to Stockholder' equity: Total liabilities / Stockholder's equity
				(5,955,160/7,443,950) = 0.8
10. Times Interest earned: Net income before interest / Net interest
		(1,457,700 /360,000) = 4.05
11. Assets turnover: Net sales/ Average assets
Average assets (13,399,110+10,069,917)/2 = $11,734,513.5
Assets turnover: $ 5,617,350 /11,734,513.5 = 0.48
12. Return on total assets: Net income after tax/ Average assets
Net income after tax: $ 966,000
Return on total assets: 966,000 /11,734,513.5 *100 = 8.23%
13. Return on stockholder's equity: Net income after tax/ Average stockholder' equity
Average stockholder's equity(7,443,950+6,556,050)/2 = 7,000,000
Return on stockholder's equity: $966,000 /7,000,000 *100 = 13.8%
14. return on common stockholder's equity = Net income after prefered dividend/ Common Stockholder's equity
Net income after preferred dividend: $ 966,000 -13,300 = $ 952,700
Average common Stockholder's equity (6,493,950+5,606,050)/2 = $6,050,000
Return on common stockholder's equity: $ 952,700 /6,050,000 *100 = 15.75%
15. Earnings per share: Net income after preferred dividend / Number of shares average
Nnumber of shares: 108,000 shares
EPS: $952,700 /108,000 = $8.82 per share
16. Price earnings ratio: market price per share/ earning per share
market price per share: $51 per share
Price earning ratio: 51 /8.82 = 5.78
17. Dividend per share: total dividend to common stockholder/ Nnumber of shares
		($ 64,800 /108,000) = $ 0.60 per share
18. Dividend yield ratio: dividend per share/ market share per share *100
		$ 0.60 /51 *100 = 1.18 %