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 $ 60 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			$ 3,193,500		$ 2,689,600
Net income			740,000		550,900
Total			$ 3,839,500		$ 3,240,500
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			$ 3,886,500		$ 3,193,500

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 4,551,550		$ 4,193,610
Cost of goods sold	1,512,560		1,391,560
Gross profit	$ 3,038,990		$ 2,802,050
Selling expenses	$ 1,057,830		$ 1,297,930
Administrative expenses	901,110		762,270
Total operating expenses	1,958,940		2,060,200
Income from operations	$ 1,080,050		$ 741,850
Other income	56,850		47,350
	$ 1,136,900		$ 789,200
Other expense (interest)	296,000		163,200
Income before income tax	$ 840,900		$ 626,000
Income tax expense	100,900		75,100
Net income	$ 740,000		$ 550,900

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Current assets
	Cash		$ 830,870		$ 721,210
	Marketable securities		1,257,540		1,195,160
	Accounts receivable (net)		810,300		759,200
	Inventories		613,200		467,200
	Prepaid expenses		157,195		144,240
		Total current assets	$ 3,669,105		$ 3,287,010
Long-term investments			1,679,245		401,079
Property, plant, and equipment (net)			4,810,000		4,329,000
Total assets			$ 10,158,350		$ 8,017,089
Liabilities
Current liabilities			$ 1,111,850		$ 1,323,589
Long-term liabilities
	Mortgage note payable, 8 %		$ 1,660,000		$ 0
	Bonds payable, 8 %		2,040,000		2,040,000
		Total long-term liabilities	$ 3,700,000		$ 2,040,000
Total liabilities			$ 4,811,850		$ 3,363,589
Stockholders' Equity
Preferred $ 0.70 stock, $ 40 par			$ 680,000		$ 680,000
Common stock, $ 10 par			780,000		780,000
Retained earnings			3,886,500		3,193,500
	Total stockholders' equity		$ 5,346,500		$ 4,653,500
Total liabilities and stockholders' equity			$ 10,158,350		$ 8,017,089

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

As per policy, only 10 parts of ratios are allowed to answer at a time, here answering 14 ratios :

Serial	Ratio	Formula	Calculation	Result
1	Working Capital	CA - CL	3.67-1.11	2.56	$
2	Current ratio	CA / CL	3.67/1.11	3.31
3	Quick ratio	CA - Invent/CL	(3.67-0.61)/1.11	2.76
4	AR turnover	Sales /Avg. Closng AR	4.55*2/(0.81+0.76)	5.80
5	Number of day's sales in receivables	closing AR*365/Sales	0.81*365/4.55	64.98	days
6	Inventory turnover	COGS/closing Inventory	1.51*2/(0.61+0.47)	2.80
7	Number of days' sales in inventory	closing invent*365/COGS	0.61*365/1.51	147.45	days
8	FA TO LT Liabilities	FA/LTL	4.81/3.7	1.30
9	Libilities to SH Eq	Liabili / SH Eq.	4.81/5.35	0.90
10	Times interest earned	EBIT/Intt. Exp.	1.14/0.3	3.80
11	Asset T/O	Sales /Avg. TA	4.55*2/(10.16+8.02)	0.50
12	Return on TA	NI / TA	0.74/10.16	0.07
13	Return on SH Eq	NI/SH Eq	0.74/5.35	0.14
14	Return on CSEq.	NI/C SH Eq	0.74/(0.78+3.89)	0.16