Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 70 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			$1,925,150		$1,619,750
Net income			456,000		331,700
Total			$2,381,150		$1,951,450
Dividends:
	On preferred stock		$5,600		$5,600
	On common stock		20,700		20,700
		Total dividends	$26,300		$26,300
Retained earnings, December 31			$2,354,850		$1,925,150

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$2,847,000		$2,623,040
Cost of goods sold	963,600		886,510
Gross profit	$1,883,400		$1,736,530
Selling expenses	$660,910		$813,430
Administrative expenses	563,000		477,730
Total operating expenses	$1,223,910		$1,291,160
Income from operations	$659,490		$445,370
Other revenue	34,710		28,430
	$694,200		$473,800
Other expense (interest)	176,000		96,800
Income before income tax	$518,200		$377,000
Income tax expense	62,200		45,300
Net income	$456,000		$331,700

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$530,580		$499,510
	Marketable securities		803,040		827,750
	Accounts receivable (net)		489,100		459,900
	Inventories		365,000		277,400
	Prepaid expenses		100,385		99,900
		Total current assets	$2,288,105		$2,164,460
Long-term investments			1,400,110		936,712
Property, plant, and equipment (net)			2,420,000		2,178,000
Total assets			$6,108,215		$5,279,172
Liabilities
Current liabilities			$693,365		$1,284,022
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			$2,893,365		$2,494,022
Stockholders' Equity
Preferred $0.70 stock, $50 par			$400,000		$400,000
Common stock, $10 par			460,000		460,000
Retained earnings			2,354,850		1,925,150
Total stockholders' equity			$3,214,850		$2,785,150
Total liabilities and stockholders' equity			$6,108,215		$5,279,172

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.

requirement for subsequent requirement, if required. Assume 365 days a year. 1,594,740 1. Working capital 2. Current ratio 3.30 2.60 3. Quick ratio 4. Accounts receivable turnover 5. Number of days' sales in receivables 6. Inventory turnover 7. Number of days' sales in inventory 60.80 days 121.66 X days 8. Ratio of fixed assets to long-term liabilities 1.1 9. Ratio of liabilities to stockholders' equity 0.90 10. Times interest earned 4.0 x 11. Asset turnover 0.50 12. Return on total assets 7.47 X % 13. Return on stockholders' equity 15.20 14. Return on common stockholders' equity 97.91 X % 15. Earnings per share on common stock $ 9.79 16. Price-earnings ratio 7.1 17. Dividends per share of common stock 0.45 18. Dividend yield 0.71 X %

Answer 1

7 Numeber of days' sales in inventory 10 Times interest earned 12 Return on total assets 14 Return on Common stockholders' equity 18 Dividend yield 138.3 Days 3.9 Times 12.2% 17.30% 0.6% Working Notes: (Rounded to one decimal places ) 7 Numeber of days' sales in inventory Ending Inventory / cost of goods sold *365 Days S365,000/S963,600 *365 days 138.3 days 10 Times interest earned Income before interest and taxes Interest Expenses $694,200/S176,000 3.9 Times 12 Return on Total assets Earning before interest and taxes / Average total assets Average total assets = (Opening total assets +closing total assets)/2 = (S5,279,172+S6,108,215)/2 S5,693,694 Return on total assets = $694,200/S5,693,694 = 12.2% 14 Return on Common stockholders' equity (Net Income -Preferrence Dividends)/Average common stockholders Equity Avearge common stockholders' equity ($460,000+$460,000+S2,354,850+$1,925,150)/2 = = S2,600,000 Return on Common stockholders' equity (S456,000-$5,600) $2,600,000 = 17.3% 18 Dividend yield annual dividend per share / Current stock per share = S0.45 $70 0.6%