Question

5. Number of days' n receivables, 18.3 EXCEL TEMPLATE Obj. 3, 4,5 PR 14-4A Measures of liquidity, solvency, and profitability 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 2012 20Y1 Retained earnings, January 1............ $3,704,000 $3,264,000 Net income...... 600,000 550,000 Total $4,304,000 $3,814,000 Dividends: On preferred stock ......... $ 10,000 $ 10,000 On common stock. ............ 100,000 100,000 Total dividends $ 110,000 $ 110,000 Retained earnings, December 31 ..... $4,194,000 $3,704,000

Answer 1

Following measure as on 31 March 2012]
1) Working Capital= Current Assets- Current liabilities
	Current assets	2,464,000
	Current liabilities	880,000
Ans:	Working capital	1,584,000
2) Current ratio= Current assets/Current liabilities
Ans:	3
3) Quick ratio= Cash+Cash equivalent+ Short term investment + Current receivable
		Current liabilities
Cash	1,050,000
Short term investment	301,000
Current receivable	585,000
Total	1,936,000
Ans:   Ratio	2
4) Accounts receivable turnover= Net credit sales/ Average accounts receivable
Assumption: The question is silent about cash and credit sales. Hence assumed the entire sales would be credit sales
Credit sales	10,850,000
Average accounts receivable	542,500
(Opening+Closing/2)
Ans: Ratio	20
5)Number of days sales in receivable= Credit sales/ Accounts receivable
Divide credit sales by 365 days=	29,726	per day
				-
Accounts receivable	585,000
Dividing accounts receivable by the credit sales per day:
Ans:                             20 days	(585000/29726)
6) Inventory turnover=	Cost of good sold/ Average inventory receivable
Cost of good sold	6,000,000
Average accounts receivable	542,500
(Opening+Closing/2)
Ans: Ratio	11