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 $ 54 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			$3,215,200		$2,727,000
Net income			720,000		558,600
Total			$3,935,200		$3,285,600
Dividends:
	On preferred stock		$11,900		$11,900
	On common stock		58,500		58,500
		Total dividends	$70,400		$70,400
Retained earnings, December 31			$3,864,800		$3,215,200

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$3,871,920		$3,567,420
Cost of goods sold	1,460,730		1,343,870
Gross profit	$2,411,190		$2,223,550
Selling expenses	$750,980		$941,410
Administrative expenses	639,720		552,890
Total operating expenses	$1,390,700		$1,494,300
Income from operations	$1,020,490		$729,250
Other revenue	53,710		46,550
	$1,074,200		$775,800
Other expense (interest)	256,000		140,800
Income before income tax	$818,200		$635,000
Income tax expense	98,200		76,400
Net income	$720,000		$558,600

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$799,780		$741,890
	Marketable securities		1,210,480		1,229,420
	Accounts receivable (net)		766,500		722,700
	Inventories		569,400		438,000
	Prepaid expenses		151,312		148,380
		Total current assets	$3,497,472		$3,280,390
Long-term investments			2,567,168		1,552,556
Property, plant, and equipment (net)			3,520,000		3,168,000
Total assets			$9,584,640		$8,000,946
Liabilities
Current liabilities			$1,059,840		$1,565,746
Long-term liabilities:
	Mortgage note payable, 8%		$1,440,000		$0
	Bonds payable, 8%		1,760,000		1,760,000
		Total long-term liabilities	$3,200,000		$1,760,000
Total liabilities			$4,259,840		$3,325,746
Stockholders' Equity
Preferred $0.70 stock, $40 par			$680,000		$680,000
Common stock, $10 par			780,000		780,000
Retained earnings			3,864,800		3,215,200
Total stockholders' equity			$5,324,800		$4,675,200
Total liabilities and stockholders' equity			$9,584,640		$8,000,946

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

Answer:

Answer 2 5 6 Working capital (3,497,472 - 1,059,840) Current ratio (3,497,472 / 1,059,840) Quick ratio (2,776,760 / 1,059,840) Account receivable turnover (3,871,920 / 744,600) Number of days' sales in receivables (365/5.20) Inventory turnover (1,460,730 / 503,700) Number of days' sales in inventory (365 / 2.90) Ratio of fixed assets to long-term liabilities (3,520,000/ 3,200,000) Ratio of liabilities to stockholders' equity (4,259,840 / 5,324,800) Times interest earned (818,200 / 256,000) $ 2,437,632 3.30 2.62 5.20 70 days 2.90 126 days 1.10 0.80 3.20 7 9 10