Question

Measures of liquidity, Solvency and Profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 61 on December 31, 20Y2. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 2041 20Y2 20Y1 Retained earnings, January 1 $ 4,742,200 $ 3,985,500 Net income 816,300 1,095,200 $ 5,837,400 Total $ 4,801,800 $ 14,000 Dividends On preferred stock On common stock Total dividends $ 14,000 45,600 45,600 $ 59,600 $ 59,600 Retained earnings, December 31 $ 5,777,800 $ 4,742,200 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 2041 20Y2 $ 6,828,785 2,540,400 20Y1 Sales Cost of goods sold Gross profit $ 6,291,710 2,337,170 $ 4,288,385 $ 3,954,540 Selling expenses $1,406,440 $ 1,769,820 Administrative expenses 1,198,075 1,039,420 Total operating expenses 2,604,515 2,809,240 Income from operations $ 1,683,870 $ 1,145,300 Other income 88,630 73,100 $ 1,218,400 $ 1,772,500 528,000 Other expense (interest) 290,400 $ 928,000 Income before income tax Income tax expense $ 1,244,500 149,300 111,700 Net income $ 1,095,200 $ 816,300 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Current assets Cash $ 1,560,770 2,362,250 1,328,600 $ 1,070,800 1,774,460 Marketable securities Accounts receivable (net) 1,248,300 Inventories 992,800 759,200 Prepaid expenses 295,278 214,160 $ 5,066,920 Total current assets Long-term investments Property, plant, and equipment (net) 163,414 $ 6,539,698 2,167,682 7,920,000 $ 16,627,380 7,128,000 Total assets $ 12,358,334 Liabilities Current liabilities $ 2,109,580 $ 1,846,134 Long-term liabilities Mortgage note payable, 8 % $ 0 Bonds payable, 8 % Total long-term liabilities $ 2,970,000 3,630,000 $ 6,600,000 $ 8,709,580 3,630,000 $ 3,630,000 $ 5,476,134 Total liabilities Stockholders' Equity

Answer 1

1) Working Capital = Current assets-Current liabilities = 6539698-2109580 = 4430118

2) Current ratio = Current assets/Current liabilities = 6539698/2109580 = 3.1:1

3) Quick ratio = Quick assets/Current liabilities = 5251620/2109580 = 2.49:1

4) Account receivable turnover = 6828785/1288450 = 5.3 Times

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