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 $ 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			$1,315,800		$1,118,300
Net income			280,000		229,100
Total			$1,595,800		$1,347,400
Dividends:
	On preferred stock		$9,100		$9,100
	On common stock		22,500		22,500
		Total dividends	$31,600		$31,600
Retained earnings, December 31			$1,564,200		$1,315,800

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$1,685,205		$1,552,620
Cost of goods sold	613,200		564,140
Gross profit	$1,072,005		$988,480
Selling expenses	$362,290		$434,660
Administrative expenses	308,625		255,280
Total operating expenses	$670,915		$689,940
Income from operations	$401,090		$298,540
Other revenue	21,110		19,060
	$422,200		$317,600
Other expense (interest)	104,000		57,600
Income before income tax	$318,200		$260,000
Income tax expense	38,200		30,900
Net income	$280,000		$229,100

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$287,740		$257,090
	Marketable securities		435,510		426,040
	Accounts receivable (net)		306,600		284,700
	Inventories		233,600		175,200
	Prepaid expenses		54,438		51,420
		Total current assets	$1,317,888		$1,194,450
Long-term investments			815,672		197,832
Property, plant, and equipment (net)			1,690,000		1,521,000
Total assets			$3,823,560		$2,913,282
Liabilities
Current liabilities			$399,360		$317,482
Long-term liabilities:
	Mortgage note payable, 8%		$580,000		$0
	Bonds payable, 8%		720,000		720,000
		Total long-term liabilities	$1,300,000		$720,000
Total liabilities			$1,699,360		$1,037,482
Stockholders' Equity
Preferred $0.70 stock, $20 par			$260,000		$260,000
Common stock, $10 par			300,000		300,000
Retained earnings			1,564,200		1,315,800
Total stockholders' equity			$2,124,200		$1,875,800
Total liabilities and stockholders' equity			$3,823,560		$2,913,282

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	$ 918528
2. Current ratio	3.3
3. Quick ratio	2.6
4. Accounts receivable turnover	5.7
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	$ 918528
2. Current ratio	3.3
3. Quick ratio	2.6
4. Accounts receivable turnover	5.7
5. Number of days' sales in receivables	64.03	days
6. Inventory turnover	3
7. Number of days' sales in inventory	121.66	days
8. Ratio of fixed assets to long-term liabilities	1.3
9. Ratio of liabilities to stockholders' equity	0.8
10. Times interest earned	4.05
11. Asset turnover	0.500295
12. Return on total assets	11.04207	%
13. Return on stockholders’ equity	13.18	%
14. Return on common stockholders’ equity	15.56	%
15. Earnings per share on common stock	$9.03
16. Price-earnings ratio	7.30
17. Dividends per share of common stock	$0.75
18. Dividend yield	1.136364	%