Question

Marshall Inc.

Comparative Retained Earnings Statement

For the Years Ended December 31, 20Y2 and 20Y1

1		20Y2	20Y1
2	Retained earnings, January 1	$3,712,000.00	$3,262,000.00
3	Net income	609,000.00	560,000.00
4	Total	$4,321,000.00	$3,822,000.00
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	$4,211,000.00	$3,712,000.00

Marshall Inc.

Comparative Income Statement

For the Years Ended December 31, 20Y2 and 20Y1

1		20Y2	20Y1
2	Sales	$10,840,000.00	$10,000,000.00
3	Cost of goods sold	6,000,000.00	5,440,000.00
4	Gross profit	$4,840,000.00	$4,560,000.00
5	Selling expenses	$2,160,000.00	$2,000,000.00
6	Administrative expenses	1,627,500.00	1,500,000.00
7	Total operating expenses	$3,787,500.00	$3,500,000.00
8	Income from operations	$1,052,500.00	$1,060,000.00
9	Other income	99,500.00	20,000.00
10		$1,152,000.00	$1,080,000.00
11	Other expense (interest)	133,000.00	120,000.00
12	Income before income tax	$1,019,000.00	$960,000.00
13	Income tax expense	410,000.00	400,000.00
14	Net income	$609,000.00	$560,000.00

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)	584,000.00	500,000.00
7	Inventories	410,000.00	380,000.00
8	Prepaid expenses	107,000.00	20,000.00
9	Total current assets	$2,452,000.00	$2,270,000.00
10	Long-term investments	800,000.00	800,000.00
11	Property, plant, and equipment (net)	5,770,000.00	5,184,000.00
12	Total assets	$9,022,000.00	$8,254,000.00
13	Liabilities
14	Current liabilities	$861,000.00	$792,000.00
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	$4,061,000.00	$3,792,000.00
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	4,211,000.00	3,712,000.00
24	Total stockholders’ equity	$4,961,000.00	$4,462,000.00
25	Total liabilities and stockholders’ equity	$9,022,000.00	$8,254,000.00

Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): Assume a 365-day year.

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

Answer 1

Ratio Analysis for 2012
working capital	current assets-current liabilities	1591000
Total current assets	2452000
Current liabilities	861000
current ratio	current assets/current liabilities	2.85
Total current assets	2452000
Current liabilities	861000
quick ratio	quick assets/current liabilities	2.25
quick assets = Total current assets - inventory-prepaid expense	2452000-410000-107000	1935000
Current liabilities		861000
accounts receivables turnover ratio	sales/average accounts receivables	20
sales		10840000
average accounts receivables	(500000+584000)/2	542000
number of days sales in receivables	365/accounts receivable turnover ratio	365/20	18.25
Inventory turnover ratio	cost of goods sold/average inventory	15.19
cost of goods sold		6000000
average inventory	(410000+380000)/2	395000
number of days sales in inventory	365/inventory turnover	365/15.19	24.03
ratio of fixed assets to long term liabilities	fixed assets/long term iabilities	1.80
fixed assets		5770000
long term liabilities		3200000
Ratio of liabilities to stockholders’ equity	total of liabilities/stockholders equity	0.82
liabilities		4061000
stockholders equity		4961000