Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 57 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 $ 1,662,900 $ 1,409,300 Net income 369,200 288,600 Total $ 1,962,100 $ 1,697,900 Dividends On preferred stock $ 6,300 $ 6,300 On common stock 28,700 28,700 Total dividends $ 35,000 $ 35,000 Retained earnings, December 31 $ 1,997,100 $ 1,662,900 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $ 2,108,970 $ 1,943,050 Cost of goods sold 792,050 728,690 Gross profit $ 1,316,920 $ 1,214,360 Selling expenses $ 426,170 $ 526,270 Administrative expenses 363,030 309,080 Total operating expenses 789,200 835,350 Income from operations $ 527,720 $ 379,010 Other income 27,780 24,190 $ 555,500 $ 403,200 Other expense (interest) 136,000 75,200 Income before income tax $ 419,500 $ 328,000 Income tax expense 50,300 39,400 Net income $ 369,200 $ 288,600 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Current assets Cash $ 313,590 $ 358,870 Marketable securities 474,620 594,690 Accounts receivable (net) 401,500 379,600 Inventories 292,000 219,000 Prepaid expenses 59,330 71,770 Total current assets $ 1,541,040 $ 1,623,930 Long-term investments 1,569,740 653,883 Property, plant, and equipment (net) 1,870,000 1,683,000 Total assets $ 4,980,780 $ 3,960,813 Liabilities Current liabilities $ 513,680 $ 587,913 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 $ 2,213,680 $ 1,527,913 Stockholders' Equity Preferred $ 0.70 stock, $ 40 par $ 360,000 $ 360,000 Common stock, $ 10 par 410,000 410,000 Retained earnings 1,997,100 1,662,900 Total stockholders' equity $ 2,767,100 $ 2,432,900 Total liabilities and stockholders' equity $ 4,980,780 $ 3,960,813 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 $ 1,027,360 2. Current ratio 3.0 3. Quick ratio 2.3 4. Accounts receivable turnover 5.4 5. Number of days' sales in receivables 120 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 to Part 1.

Working Capital = Current Assets – Current Liabilities
Working Capital = $1,541,040 - $513,680
Working Capital = $1,027,360

Answer to Part 2.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = 1,541,040 / 513,680
Current Ratio = 3.0: 1

Answer to Part 3.

Quick Ratio = (Current Assets – Inventories – Prepaid Expenses) / Current Liabilities
Quick Ratio = (1,541,040 – 292,000 – 59,330) / 513,680
Quick Ratio = 1,189,710 / 513,680
Quick Ratio = 2.3: 1

Answer to Part 4.

Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
Average Accounts Receivable = (401,500 + 379,600)/2
Average Accounts Receivable = $390,550

Accounts Receivable Turnover = 2,108,970 / 390,550
Accounts Receivable Turnover = 5.4 times

Answer to Part 5.

Number of days' Sales in Receivables = 365 / Accounts Receivable Turnover
Number of days' Sales in Receivables = 365 / 5.4
Number of days' Sales in Receivables = 67.59
or Number of days' Sales in Receivables = 68 days