In: Accounting
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2.
Marshall Inc. |
Comparative Retained Earnings Statement |
For the Years Ended December 31, 20Y2 and 20Y1 |
1 |
20Y2 |
20Y1 |
|
2 |
Retained earnings, January 1 |
$3,704,000.00 |
$3,264,000.00 |
3 |
Net income |
600,000.00 |
550,000.00 |
4 |
Total |
$4,304,000.00 |
$3,814,000.00 |
5 |
Dividends: |
||
6 |
On preferred stock |
$10,000.00 |
$10,000.00 |
7 |
On common stock |
100,000.00 |
100,000.00 |
8 |
Total dividends |
$110,000.00 |
$110,000.00 |
9 |
Retained earnings, December 31 |
$4,194,000.00 |
$3,704,000.00 |
Marshall Inc. |
Comparative Income Statement |
For the Years Ended December 31, 20Y2 and 20Y1 |
1 |
20Y2 |
20Y1 |
|
2 |
Sales |
$10,850,000.00 |
$10,000,000.00 |
3 |
Cost of goods sold |
6,000,000.00 |
5,450,000.00 |
4 |
Gross profit |
$4,850,000.00 |
$4,550,000.00 |
5 |
Selling expenses |
$2,170,000.00 |
$2,000,000.00 |
6 |
Administrative expenses |
1,627,500.00 |
1,500,000.00 |
7 |
Total operating expenses |
$3,797,500.00 |
$3,500,000.00 |
8 |
Income from operations |
$1,052,500.00 |
$1,050,000.00 |
9 |
Other revenue |
99,500.00 |
20,000.00 |
10 |
$1,152,000.00 |
$1,070,000.00 |
|
11 |
Other expense (interest) |
132,000.00 |
120,000.00 |
12 |
Income before income tax |
$1,020,000.00 |
$950,000.00 |
13 |
Income tax expense |
420,000.00 |
400,000.00 |
14 |
Net income |
$600,000.00 |
$550,000.00 |
Marshall Inc. |
Comparative Balance Sheet |
December 31, 20Y2 and 20Y1 |
1 |
20Y2 |
20Y1 |
|
2 |
Assets |
||
3 |
Current assets: |
||
4 |
Cash |
$1,050,000.00 |
$950,000.00 |
5 |
Marketable securities |
301,000.00 |
420,000.00 |
6 |
Accounts receivable (net) |
585,000.00 |
500,000.00 |
7 |
Inventories |
420,000.00 |
380,000.00 |
8 |
Prepaid expenses |
108,000.00 |
20,000.00 |
9 |
Total current assets |
$2,464,000.00 |
$2,270,000.00 |
10 |
Long-term investments |
800,000.00 |
800,000.00 |
11 |
Property, plant, and equipment (net) |
5,760,000.00 |
5,184,000.00 |
12 |
Total assets |
$9,024,000.00 |
$8,254,000.00 |
13 |
Liabilities |
||
14 |
Current liabilities |
$880,000.00 |
$800,000.00 |
15 |
Long-term liabilities: |
||
16 |
Mortgage note payable, 6%, |
$200,000.00 |
$0.00 |
17 |
Bonds payable, 4%, |
3,000,000.00 |
3,000,000.00 |
18 |
Total long-term liabilities |
$3,200,000.00 |
$3,000,000.00 |
19 |
Total liabilities |
$4,080,000.00 |
$3,800,000.00 |
20 |
Stockholders’ Equity |
||
21 |
Preferred 4% stock, $5 par |
$250,000.00 |
$250,000.00 |
22 |
Common stock, $5 par |
500,000.00 |
500,000.00 |
23 |
Retained earnings |
4,194,000.00 |
3,704,000.00 |
24 |
Total stockholders’ equity |
$4,944,000.00 |
$4,454,000.00 |
25 |
Total liabilities and stockholders’ equity |
$9,024,000.00 |
$8,254,000.00 |
Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts):
1. | Working capital |
2. | Current ratio |
3. | Quick ratio |
4. | Accounts receivable turnover |
5. | Number of days’ sales in receivables |
6. | Inventory turnover |
7. | Number of days’ sales in inventory |
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 |
CALCULATION | ANSWER | ||
1 | Working capital | = 2464000-880000 = | 1584000 |
2 | Current ratio | =2464000/880000 = | 2.8 |
3 | Quick ratio | = (1050000+301000+585000)/880000 = | 2.2 |
4 | Accounts receivable turnover | = 10850000*2/(585000+500000) = | 20.0 |
5 | Number of days’ sales in receivables | = 365/20 = | 18.3 |
6 | Inventory turnover | = 6000000*2/(420000+380000) = | 15.0 |
7 | Number of days’ sales in inventory | = 365/15 = | 24.3 |
8 | Ratio of fixed assets to long-term liabilities | = 5760000/3200000 = | 1.8 |
9 | Ratio of liabilities to stockholders’ equity | = 4080000/4944000 = | 0.8 |
10 | Times interest earned | = 1152500/132000 = | 8.7 |
11 | Asset turnover | = 10850000*2/(9024000+8254000) = | 1.3 |
12 | Return on total assets | = 600000*2/(9024000+8254000) = | 6.9% |
13 | Return on stockholders’ equity | = 600000*2/(4944000+4454000) = | 12.8% |
14 | Return on common stockholders’ equity | = (600000-10000)*2/(500000+4194000+500000+3704000) = | 13.3% |
15 | Earnings per share on common stock | = 590000/100000 = | $ 5.90 |
16 | Price-earnings ratio | = 82.60/5.9 = | 14.0 |
17 | Dividends per share of common stock | = 100000/100000 = | $ 1.00 |
18 | Dividend yield | = 1/82.6 = | 1.2% |