Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 62 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			$ 2,805,100		$ 2,360,600
Net income			668,800		483,500
Total			$ 3,473,900		$ 2,844,100
Dividends
	On preferred stock		$ 8,400		$ 8,400
	On common stock		30,600		30,600
		Total dividends	$ 39,000		$ 39,000
Retained earnings, December 31			$ 3,434,900		$ 2,805,100

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 3,547,800		$ 3,268,770
Cost of goods sold	1,357,800		1,249,180
Gross profit	$ 2,190,000		$ 2,019,590
Selling expenses	$ 673,700		$ 871,420
Administrative expenses	573,900		511,790
Total operating expenses	1,247,600		1,383,210
Income from operations	$ 942,400		$ 636,380
Other income	49,600		40,620
	$ 992,000		$ 677,000
Other expense (interest)	232,000		128,000
Income before income tax	$ 760,000		$ 549,000
Income tax expense	91,200		65,500
Net income	$ 668,800		$ 483,500

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Current assets
	Cash		$ 559,830		$ 750,980
	Marketable securities		847,310		1,244,480
	Accounts receivable (net)		678,900		635,100
	Inventories		511,000		394,200
	Prepaid expenses		105,912		150,200
		Total current assets	$ 2,702,952		$ 3,174,960
Long-term investments			2,593,868		1,697,851
Property, plant, and equipment (net)			3,190,000		2,871,000
Total assets			$ 8,486,820		$ 7,743,811
Liabilities
Current liabilities			$ 871,920		$ 2,058,711
Long-term liabilities
	Mortgage note payable, 8 %		$ 1,300,000		$ 0
	Bonds payable, 8 %		1,600,000		1,600,000
		Total long-term liabilities	$ 2,900,000		$ 1,600,000
Total liabilities			$ 3,771,920		$ 3,658,711
Stockholders' Equity
Preferred $ 0.70 stock, $ 50 par			$ 600,000		$ 600,000
Common stock, $ 10 par			680,000		680,000
Retained earnings			3,434,900		2,805,100
	Total stockholders' equity		$ 4,714,900		$ 4,085,100
Total liabilities and stockholders' equity			$ 8,486,820		$ 7,743,811

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	$	1831032
2. Current ratio		3.1
3. Quick ratio		2.4
4. Accounts receivable turnover		5.4
5. Number of days' sales in receivables		67.6 days
6. Inventory turnover		3
7. Number of days' sales in inventory		121.7 days
8. Ratio of fixed assets to long-term liabilities		1.1
9. Ratio of liabilities to stockholders' equity		0.8
10. Times interest earned		4.3
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

11. Asset turnover = Net Sales / Total Assets

= 3,547,800/8,486,820 = 41.8 %

12. Return on total assets = Net Income/Average assets

= 668,800/( 8,486,820+7743811)/2 = 8.2%

13. Return on stockholders' equity = Net Income/Stockholders' Equity

= 668,800/4,714,900 = 14.2%

14. Return on common stock holder equity = Net income - Preference Dividend /Average common stock equity

= 668,800/(4,114,900+3,485,100)/2 = 17.6%

15.Earning per share on common stock = Net Income - Preference dividend/Avg no of shares

= 668,800-8,400/68,000 = $9.71

16.Price-earning ratio =  Price per share/Earning per share

= 62/9.71 = 6.4

17.Dividend per share on common stock= Dividend paid /No of shares

= 30,600/68,000 = $ 0.45

18. Dividend Yield = Annual dividend per share / stock price per share

= 0.45/62 = 0.7%