Question

easures of liquidity, Solvency and Profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall 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 $ 3,623,800 $ 3,083,800 Net income 784,000 631,600 Total $4,407,800 $ 3,715,400 Dividends: On preferred stock $ 13,300 $ 13,300 On common stock 78,300 78,300 Total dividends $ 91,600 $ 91,600 Retained earnings, December 31 $ 4,316,200 $ 3,623,800 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $ 4,557,025 $ 4,198,590 Cost of goods sold 1,651,260 1,519,160 Gross profit $ 2,905,765 $ 2,679,430 Selling expenses $ 964,340 $ 1,169,030 Administrative expenses 821,475 686,580 Total operating expenses 1,785,815 1,855,610 Income from operations $ 1,119,950 $ 823,820 Other revenue 58,950 52,580 $ 1,178,900 $ 876,400 Other expense (interest) 288,000 158,400 Income before income tax $ 890,900 $ 718,000 Income tax expense 106,900 86,400 Net income $ 784,000 $ 631,600 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Current assets Cash $ 730,520 $ 806,250 Marketable securities 1,105,650 1,336,080 Accounts receivable (net) 854,100 803,000 Inventories 642,400 496,400 Prepaid expenses 138,210 161,250 Total current assets $ 3,470,880 $ 3,602,980 Long-term investments 3,272,280 1,620,769 Property, plant, and equipment (net) 3,960,000 3,564,000 Total assets $ 10,703,160 $ 8,787,749 Liabilities Current liabilities $ 1,156,960 $ 1,553,949 Long-term liabilities Mortgage note payable, 8 % $ 1,620,000 $ 0 Bonds payable, 8 % 1,980,000 1,980,000 Total long-term liabilities $ 3,600,000 $ 1,980,000 Total liabilities $ 4,756,960 $ 3,533,949 Stockholders' Equity Preferred $ 0.70 stock, $ 40 par $ 760,000 $ 760,000 Common stock, $ 10 par 870,000 870,000 Retained earnings 4,316,200 3,623,800 Total stockholders' equity $ 5,946,200 $ 5,253,800 Total liabilities and stockholders' equity $ 10,703,160 $ 8,787,749 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

	Marshell Inc.
Given	Year	20Y2	20Y1
	Beginning Retained Earnings	$    3,623,800.00	$ 3,083,800.00
	Net Income	$        784,000.00	$      631,600.00
	Total	$    4,407,800.00	$ 3,715,400.00
	Less: Dividend to
	Preferred Stock	$          13,300.00	$        13,300.00
	Common Stock	$          78,300.00	$        78,300.00
	Total Dividend	$          91,600.00	$        91,600.00
	Ending Retained Earnings	$    4,316,200.00	$ 3,623,800.00
	Marshell Inc.
	COMPARATIVE INCOME STATEMENT
	YEAR	20Y2	20Y1
	Sales	$    4,557,025.00	$ 4,198,590.00
	Less: Cost of goods sold sold	$    1,651,260.00	$ 1,519,160.00
	Gross Profit	$    2,905,765.00	$ 2,679,430.00
	Selling Expenses	$        964,340.00	$ 1,169,030.00
	Administerative Expenses	$        821,475.00	$      686,580.00
	Total Operating Expense	$    1,785,815.00	$ 1,855,610.00
	Income from Operation	$    1,119,950.00	$      823,820.00
	Other Revenue	$          58,950.00	$        52,580.00
	Net Income before Interest and Taxes	$    1,178,900.00	$      876,400.00
	Interest	$        288,000.00	$      158,400.00
	Net Income before Taxes	$        890,900.00	$      718,000.00
	Provision for Income Taxes	$        106,900.00	$        86,400.00
	Net Income after tax	$        784,000.00	$      631,600.00
	Marshell Inc.
	COMPARATIVE BALANCE SHEET
	YEAR	20Y2	20Y1
	ASSETS
	CURRENT ASSETS
	Cash	$        730,520.00	$      806,250.00
	Marketable Securities	$    1,105,650.00	$ 1,336,080.00
	Accounts Receivable	$        854,100.00	$      803,000.00
	Mercendise Inventory	$        642,400.00	$      496,400.00
	Prepaid Expenses	$        138,210.00	$      161,250.00
	Total Current Assets	$    3,470,880.00	$ 3,602,980.00
	Long Term Investments	$    3,272,280.00	$ 1,620,769.00
	PLANT & EQUIPMENT
	Building(Net)	$    3,960,000.00	$ 3,564,000.00
	Total Assets	$ 10,703,160.00	$ 8,787,749.00
	LIABILITIES
	CURRENT LIABILITIES	$    1,156,960.00	$ 1,553,949.00
	Mortgage Notes Payable	$    1,620,000.00	$                       -
	Bonds Payable	$    1,980,000.00	$ 1,980,000.00
	Total Long tem Liabilities	$    3,600,000.00	$ 1,980,000.00
	Shareholder's Equity
	Preferred Stock	$        760,000.00	$      760,000.00
	Common Stock	$        870,000.00	$      870,000.00
	Retained Earnings	$    4,316,200.00	$ 3,623,800.00
	Total Stock Holder's Equity	$    5,946,200.00	$ 5,253,800.00
	Total Liabilities & Stockholder's Equity	$ 10,703,160.00	$ 8,787,749.00
	Formulas
	Year	20Y2
1)	Working Capital=Current Assets-Current Liabilities
	Total Current Assets	$    3,470,880.00
	Total Current Liabilities	$    1,156,960.00
	Working Capital=($3470880-$1156960)	$    2,313,920.00
2)	Current Ratio
	Current Assets/Currrent liabilities
	Current Assets	$    3,470,880.00
	Current Liabilities	$    1,156,960.00
	Current Assets/Currrent liabilities=($3470880/$1156960)	3	:1
3)	Quick Ratio=(Quick Assets/Current Liabilities
	Quick Assets=Current Assets-Inventory-Prepaid Expenses
	Quick Assets=($3470880-$642400-$138210)	$    2,690,270.00
	Current Liabilities	$    1,156,960.00
	Quick Ratio=($2690270/$1156960)	$                     2.33	:1
4)	Accounts Receivable Turnover=Credit Sales/Average Accounts Receivable
	Sales	$    4,557,025.00
	Beginning Accounts Receivable	$        803,000.00
	Ending Accounts Receivable	$        854,100.00
	Average Accounts Receivable=(Beginning Accounts Receivable+Ending Accounts Receivable)/2
	Average Accounts Receivable=($803000+$854100)/2	$        828,550.00
	Accounts Receivable Turnover=($4557025/$828550)	5.5	Times
5)	Number of Days sales in receivable days=(Accounts Receivable/Sales)*365
	Accounts Receivable	$        854,100.00
	Sales	$    4,557,025.00
	Number of days sales in receivable days=($854100/$4557025)*365	68.4	Days
6)	Inventory Turnover =Cost of goods sold/Average Inventory
	Cost of goods sold	$    1,651,260.00
	Beginning Inventory	$        496,400.00
	Ending Inventory	$        642,400.00
	Average Inventory=(Beginning Inventory+Ending Inventory)/2
	Average Inventory=($496400+$642400)/2	$        569,400.00
	Inventory Turnover =($1651260/$569400)	2.9	Times
7)	Number of days sales in Inventory days=365/Inventory Turnover
	Inventory Turnover	2.9
	Number of days sales in Inventory days=365/2.90	125.9	Days
8)	Ratio of Fixed Assets to Long Term Liabilities
	Fixed Assets/Long Term Liabilities
	Fixed Assets	$    3,960,000.00
	Long Term Liabilites	$    3,600,000.00
	Ratio of Fixed Assets to Long Term Liabilities=($3960000/$3600000)	1.1
9)	Liabilities to stockholder's equity=(Total Liabilities/Stockholder's Equity)
	Total Liabilities=	$    4,756,960.00
	Stock holder's Equity	$    5,946,200.00
	Liabilities to stockholder's equity=($4756960/$5946200)	0.8
10)	Times Interest Earned=Net Income befor interest and tax/Interest
	Net Income before interest and tax	$    1,178,900.00
	Interest	$        288,000.00
	Times Interest Earned=($1178900/$288000)	4.1	Times
11)	Assets Turnover=Net Sales/Average Total Assets
	Beginning Total Assets	$    8,787,749.00
	Ending Total Assets	$ 10,703,160.00
	Sales	$    4,557,025.00
	Average Total Assets=($8787749+$10703160)/2	$    9,745,454.50
	Assets Turnover=($4557025/$9745454.50)	0.5	Times