Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 63 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			$1,939,000		$1,634,300
Net income			432,000		334,700
Total			$2,371,000		$1,969,000
Dividends:
	On preferred stock		$7,000		$7,000
	On common stock		23,000		23,000
		Total dividends	$30,000		$30,000
Retained earnings, December 31			$2,341,000		$1,939,000

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$2,467,400		$2,273,380
Cost of goods sold	963,600		886,510
Gross profit	$1,503,800		$1,386,870
Selling expenses	$469,940		$591,370
Administrative expenses	400,310		347,310
Total operating expenses	$870,250		$938,680
Income from operations	$633,550		$448,190
Other revenue	33,350		28,610
	$666,900		$476,800
Other expense (interest)	176,000		96,800
Income before income tax	$490,900		$380,000
Income tax expense	58,900		45,300
Net income	$432,000		$334,700

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$515,360		$441,230
	Marketable securities		780,010		731,170
	Accounts receivable (net)		489,100		459,900
	Inventories		365,000		277,400
	Prepaid expenses		97,500		88,250
		Total current assets	$2,246,970		$1,997,950
Long-term investments			1,194,930		499,105
Property, plant, and equipment (net)			2,640,000		2,376,000
Total assets			$6,081,900		$4,873,055
Liabilities
Current liabilities			$680,900		$864,055
Long-term liabilities:
	Mortgage note payable, 8%		$990,000		$0
	Bonds payable, 8%		1,210,000		1,210,000
		Total long-term liabilities	$2,200,000		$1,210,000
Total liabilities			$2,880,900		$2,074,055
Stockholders' Equity
Preferred $0.70 stock, $40 par			$400,000		$400,000
Common stock, $10 par			460,000		460,000
Retained earnings			2,341,000		1,939,000
Total stockholders' equity			$3,201,000		$2,799,000
Total liabilities and stockholders' equity			$6,081,900		$4,873,055

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.

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

11. Assets Turnover = Net Sales / Average Assets
Assets Turnover = 2467400 / ((6081900+4873055)/2) = 45.05%
12. Return on total assets = (Income After tax + Interest expense) / Average Assets
12. Return on total assets = (432000 + 176000) / (6081900+4873055)/2 = 11.10%
13. Return on stockholders’ equity = Income after tax / Average stock holders equity
13. Return on stockholders’ equity = 432000 / (3201000+2799000)/2 = 14.40%
14. Return on common stockholders’ equity = Income after preferred income / Average common stock holder
14. Return on common stockholders’ equity = (432000-7000) / 2600000 = 16.35%
15. Earnings per share on common stock = 425000 / 46000 = 9.24
16. Price-earnings ratio = 63 / 9.24 = 6.82
17. Dividend per share = 23000 / 46000 = 0.5
18. Dividend Yield ratio = 0.5 / 63 = 0.79%