Question

Measures of liquidity, Solvency, and Profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 56 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			$1,793,525		$1,515,775
Net income			425,600		310,400
Total			$2,219,125		$1,826,175
Dividends:
	On preferred stock		$13,300		$13,300
	On common stock		19,350		19,350
		Total dividends	$32,650		$32,650
Retained earnings, December 31			$2,186,475		$1,793,525

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$2,205,330		$2,031,930
Cost of goods sold	854,100		785,770
Gross profit	$1,351,230		$1,246,160
Selling expenses	$407,710		$529,130
Administrative expenses	347,300		310,760
Total operating expenses	$755,010		$839,890
Income from operations	$596,220		$406,270
Other revenue	31,380		25,930
	$627,600		$432,200
Other expense (interest)	144,000		79,200
Income before income tax	$483,600		$353,000
Income tax expense	58,000		42,600
Net income	$425,600		$310,400

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$450,950		$432,610
	Marketable securities		682,520		716,890
	Accounts receivable (net)		430,700		401,500
	Inventories		321,200		248,200
	Prepaid expenses		85,324		86,520
		Total current assets	$1,970,694		$1,885,720
Long-term investments			1,262,961		769,607
Property, plant, and equipment (net)			2,160,000		1,944,000
Total assets			$5,393,655		$4,599,327
Liabilities
Current liabilities			$597,180		$1,005,802
Long-term liabilities:
	Mortgage note payable, 8%		$810,000		$0
	Bonds payable, 8%		990,000		990,000
		Total long-term liabilities	$1,800,000		$990,000
Total liabilities			$2,397,180		$1,995,802
Stockholders' Equity
Preferred $0.70 stock, $20 par			$380,000		$380,000
Common stock, $10 par			430,000		430,000
Retained earnings			2,186,475		1,793,525
Total stockholders' equity			$2,996,475		$2,603,525
Total liabilities and stockholders' equity			$5,393,655		$4,599,327

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.

1. Working capital	$
2. Current ratio
3. Quick ratio
4. Accounts receivable turnover
5. Number of days' sales in receivables		days
6. Inventory turnover
7. Number of days' sales in inventory		days
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		%

Answer 1

1) Working capital = Current assets-Current liabilities = 1970694-597180 = 1373514

2) Current ratio = Current asset/Current liabilities = 1970694/597180 = 3.3

3) Quick ratio = Quick asset/Current liabilities = 1564170/597180 = 2.62:1

4) Account receivable turnover = 2205330/416100 = 5.3 Times

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