Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 56 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			$ 1,568,100		$ 1,336,200
Net income			345,600		273,700
Total			$ 1,830,100		$ 1,609,900
Dividends
	On preferred stock		$ 11,200		$ 11,200
	On common stock		30,600		30,600
		Total dividends	$ 41,800		$ 41,800
Retained earnings, December 31			$ 1,871,900		$ 1,568,100

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 1,841,060		$ 1,696,210
Cost of goods sold	744,600		685,030
Gross profit	$ 1,096,460		$ 1,011,180
Selling expenses	$ 324,970		$ 411,180
Administrative expenses	276,830		241,480
Total operating expenses	601,800		652,660
Income from operations	$ 494,660		$ 358,520
Other income	26,040		22,880
	$ 520,700		$ 381,400
Other expense (interest)	128,000		70,400
Income before income tax	$ 392,700		$ 311,000
Income tax expense	47,100		37,300
Net income	$ 345,600		$ 273,700

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Current assets
	Cash		$ 268,740		$ 346,970
	Marketable securities		406,730		574,980
	Accounts receivable (net)		365,000		343,100
	Inventories		277,400		219,000
	Prepaid expenses		50,842		69,390
		Total current assets	$ 1,368,712		$ 1,553,440
Long-term investments			1,304,708		507,441
Property, plant, and equipment (net)			1,920,000		1,728,000
Total assets			$ 4,593,420		$ 3,788,881
Liabilities
Current liabilities			$ 441,520		$ 660,781
Long-term liabilities
	Mortgage note payable, 8 %		$ 720,000		$ 0
	Bonds payable, 8 %		880,000		880,000
		Total long-term liabilities	$ 1,600,000		$ 880,000
Total liabilities			$ 2,041,520		$ 1,540,781
Stockholders' Equity
Preferred $ 0.70 stock, $ 20 par			$ 320,000		$ 320,000
Common stock, $ 10 par			360,000		360,000
Retained earnings			1,871,900		1,568,100
	Total stockholders' equity		$ 2,551,900		$ 2,248,100
Total liabilities and stockholders' equity			$ 4,593,420		$ 3,788,881

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

Answer 1.

Working Capital = Current assets - Current Liabilities
Working Capital = $1,368,712 - $441,520
Working Capital = $927,192

Answer 2.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $1,368,712 / $441,520
Current Ratio = 3.10

Answer 3.

Quick Ratio = (Current Assets - Inventories) / Current Liabilities
Quick Ratio = ($1,368,712 - $277,400) / $441,520
Quick Ratio = 2.47

Answer 4.

Average Accounts Receivable = ($365,000 + $343,100) / 2
Average Accounts Receivable = $354,050

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $1,841,060 / $354,050
Accounts Receivable Turnover = 5.20

Answer 5.

Number of days’ sales in receivable = 365 / Accounts Receivable Turnover
Number of days’ sales in receivable = 365 / 5.20
Number of days’ sales in receivable = 70.19 days

Answer 6.

Average Inventory = ($277,400 + $219,000) / 2
Average Inventory = $248,200

Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $744,600 / $248,200
Inventory Turnover = 3

Answer 7.

Number of days’ sales in inventory = 365 / Inventory Turnover
Number of days’ sales in inventory = 365 / 3
Number of days’ sales in inventory = 121.67