Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.80 on December 31, 20Y2.

Marshall Inc.

Comparative Retained Earnings Statement

For the Years Ended December 31, 20Y2 and 20Y1

1		20Y2	20Y1
2	Retained earnings, January 1	$3,716,000.00	$3,266,000.00
3	Net income	630,000.00	560,000.00
4	Total	$4,346,000.00	$3,826,000.00
5	Dividends:
6	On preferred stock	$10,000.00	$10,000.00
7	On common stock	100,000.00	100,000.00
8	Total dividends	$110,000.00	$110,000.00
9	Retained earnings, December 31	$4,236,000.00	$3,716,000.00

Marshall Inc.

Comparative Income Statement

For the Years Ended December 31, 20Y2 and 20Y1

1		20Y2	20Y1
2	Sales	$10,860,000.00	$10,000,000.00
3	Cost of goods sold	6,000,000.00	5,440,000.00
4	Gross profit	$4,860,000.00	$4,560,000.00
5	Selling expenses	$2,160,000.00	$2,000,000.00
6	Administrative expenses	1,627,500.00	1,500,000.00
7	Total operating expenses	$3,787,500.00	$3,500,000.00
8	Income from operations	$1,072,500.00	$1,060,000.00
9	Other revenue	99,500.00	20,000.00
10		$1,172,000.00	$1,080,000.00
11	Other expense (interest)	132,000.00	120,000.00
12	Income before income tax	$1,040,000.00	$960,000.00
13	Income tax expense	410,000.00	400,000.00
14	Net income	$630,000.00	$560,000.00

Marshall Inc.

Comparative Balance Sheet

December 31, 20Y2 and 20Y1

1		20Y2	20Y1
2	Assets
3	Current assets:
4	Cash	$1,050,000.00	$950,000.00
5	Marketable securities	301,000.00	420,000.00
6	Accounts receivable (net)	586,000.00	500,000.00
7	Inventories	410,000.00	380,000.00
8	Prepaid expenses	107,000.00	20,000.00
9	Total current assets	$2,454,000.00	$2,270,000.00
10	Long-term investments	800,000.00	800,000.00
11	Property, plant, and equipment (net)	5,750,000.00	5,184,000.00
12	Total assets	$9,004,000.00	$8,254,000.00
13	Liabilities
14	Current liabilities	$818,000.00	$788,000.00
15	Long-term liabilities:
16	Mortgage note payable, 6%,	$200,000.00	$0.00
17	Bonds payable, 4%,	3,000,000.00	3,000,000.00
18	Total long-term liabilities	$3,200,000.00	$3,000,000.00
19	Total liabilities	$4,018,000.00	$3,788,000.00
20	Stockholders’ Equity
21	Preferred 4% stock, $5 par	$250,000.00	$250,000.00
22	Common stock, $5 par	500,000.00	500,000.00
23	Retained earnings	4,236,000.00	3,716,000.00
24	Total stockholders’ equity	$4,986,000.00	$4,466,000.00
25	Total liabilities and stockholders’ equity	$9,004,000.00	$8,254,000.00

Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): Assume a 365-day year.

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

Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): Assume a 365-day year.

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

solution: Answer 1 Working capital 2 Current ratio 3 Quick ratio 4 Accounts receivable turnover 5 Number of days' sales in receivables 6 Inventory turnover 7 Number of days' sales in inventory 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 Formula Current assets-current liabilities Current assets/current liabilities (Cash + marketable securities +A/R)/current liabilities net credit sales /average account receivable 365/Accounts receivable turnover COGS/average inventory 365/Inventory turnover fixed assets/long term liabilities Total liabiltiies/stockholder equity (Income from operation+other revenue/Interest expense) net sales /average total assets net income/average Total assets net income/average stockholder equity (net income-preferred dividend)/average common stockholder equity (net income-preferred dividend)/Average common stock outstanding MPS/EPS common stock dividend/common stock outstanding Dividend per share of common stock/MPS calculation 2454000-818000 1636000 2454000/818000 3.0 (1050000+301000+586000)/818000 2.4 10860000/((586000+500000)/2) 20.0 365/20 18.3 days 6000000/((410000+380000)/2) 15.2 365/15.2 24.0 days 5750000/3200000 4018000/4986000 1172000/132000 10860000/((9004000+8254000)/2) 630000/((9004000+8254000)/2) 7.3% 630000/((4986000+4466000)/2) 13.3% (630000-10000)/((500000+4236000+500000+3716000)/2) | 13.9% (630000-10000)/(((500000+500000)/2)/5) 6.20 82.8/6.2 13.4 100000/(500000/5) 1.00 1/82.8 1.2% EPS=Earning per share MPS=Market price per share Sheet24 Sheet25 Sheet26 Sheet27 Sheet28 Sheet29 Sheet30 Sheet31 Sheet32 Sheet33 HA ENG will TOUK 18:44 02/02/2020