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 $ 56 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 $2,715,500 $2,304,500 Net income 630,000 472,000 Total $3,345,500 $2,776,500 Dividends: On preferred stock $9,800 $9,800 On common stock 51,200 51,200 Total dividends $61,000 $61,000 Retained earnings, December 31 $3,284,500 $2,715,500 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $4,015,000 $3,699,250 Cost of goods sold 1,511,100 1,390,210 Gross profit $2,503,900 $2,309,040 Selling expenses $833,000 $1,040,630 Administrative expenses 709,600 611,160 Total operating expenses $1,542,600 $1,651,790 Income from operations $961,300 $657,250 Other revenue 50,600 41,950 $1,011,900 $699,200 Other expense (interest) 296,000 163,200 Income before income tax $715,900 $536,000 Income tax expense 85,900 64,000 Net income $630,000 $472,000 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Y1 Assets Current assets Cash $970,930 $641,710 Marketable securities 1,469,520 1,063,420 Accounts receivable (net) 751,900 708,100 Inventories 569,400 438,000 Prepaid expenses 183,690 128,340 Total current assets $3,945,440 $2,979,570 Long-term investments 1,032,010 291,665 Property, plant, and equipment (net) 4,440,000 3,996,000 Total assets $9,417,450 $7,267,235 Liabilities Current liabilities $1,232,950 $1,311,735 Long-term liabilities: Mortgage note payable, 8% $1,660,000 $0 Bonds payable, 8% 2,040,000 2,040,000 Total long-term liabilities $3,700,000 $2,040,000 Total liabilities $4,932,950 $3,351,735 Stockholders' Equity Preferred $0.70 stock, $40 par $560,000 $560,000 Common stock, $10 par 640,000 640,000 Retained earnings 3,284,500 2,715,500 Total stockholders' equity $4,484,500 $3,915,500 Total liabilities and stockholders' equity $9,417,450 $7,267,235 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 $ 2,712,490 2. Current ratio 3.2 3. Quick ratio 2.5 4. Accounts receivable turnover 3.6 5. Number of days' sales in receivables 101.3 days 6. Inventory turnover 1.9 7. Number of days' sales in inventory 192.1 days 8. Ratio of fixed assets to long-term liabilities 1.2 9. Ratio of liabilities to stockholders' equity 1.1 10. Times interest earned 3.4 11. Asset turnover 0.48 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 % Check My Work2 more Check My Work uses remaining.

Answer 1

Aneuer Page: No 0 o working capital 2000rking Capital - Current assets - Current liabilities - 3945440 - 1282950 = $ 2712490 H..coviking capital - $ 2712490 Cayenin oratio = 3.2 Corrent oratio. Currento asseto Cevrent liabilities 3945440 1232950 . Ti Current oratio = 3.2 ☺ Quick oratio . Quick vratio cash + merketable Securities + account receivable Current liabilities 970930 + 1469530 + 751900 7232950 = 2.589 2.6 . Quick ratio = 2.6

Page, No @ Accounts receivable twin over Accounts receivable fannover = Net credit sales Average accounts receivable 4 015000 751900 + 70900 4015000 20000 -515 - Accounts receivable turnover = 515 5.5 © Nog days eales en secimable 365 days No. of days sales in receivable - Accounts receivable turnover E 365 = 6614 days Tiido. of days sales in receivcikk = 66.4 days O Inventory teen Cost of goods sold Inventory turnover - Average inventory O . Alen

Page No ③ 154,100 569400 + 438000 1511,100 503700 - - 3 turnover 1. Inventory tronnover = 3 No. of days sales inventory 365 days No. of days sales in inventory = 5 = 36 =121.7 days . . No. of days sales in inventory = 121-7 days ② Ratio fixed assets to long term liabilities faced assets Ratio of fixed assets to long term liabilities and longterm liabilities 444 4440,000 3400,000 T Ratio of fixed assets to Longterm liabilities = 102

Page No 4 Ratio of liabilities to seckholders equity Ratio of liabilities to shockholders equity Total Liabilities : stockholders equity 4932950 4484500 . = 3.4 1. Ratio of liabilities to stockholders equity - 1 CO Time interest econed Time interest earned - Income from operation + other devenue Interest expense 1011900 296000 .Time interest earned - 3.4 @ the set tunnaren . : Net sales Asset turnover : Average total assels 4015000 .: 0.48 9414450+ 267235

Page No ③ Ti Asset turnover = 0.48 @ Return on Return on total assets toreul assets a Net income Average total assets 630,000 9414450 + 42673351 = 0.0755 0.08 ☺ 1: Return on total assets a 0.08 = 84 Relig, on roochhofdenis equality Net income Return on rolock holder's equilig s-N Average sfoch helder's equality 630,000 4484500 + 39155007 - 0.15.-15%. Tu Reliurn on stockholden's equity = 15%

Reliance un comment seckholden's equity Page.avo © Return on common isfockholders equili. Net income - prebevredi dividend Ang common stockholders equeting 630,000 - 9800 7 640,000 + 3284500 + 640,000 + 2415,500 7 620200 3640000 Č 174 1. Return on common rsfock holden's equilig = 14%. © Earnings poema share CEPs) on common stock EPS on common refock. Net income – Preferred dividend Ang common stock outstanding 630,000 - 9800 @40,000 + 640,000 7 $10 620 200 64000 - 9.4 : ... EPS on common stock = 9.7

Page No © Price carrings ratio Yrice earnings ratio e Market price frohore EPS 56 9.7 = 5.7 5.8 Price earnings ratio 518 Dividendes per chance of common stock Dividenols per share of common stock - Coromon stock dividend Commen stock out standing 5/200 640,000 (49000) : = 0.8 : Dividends per share of common stock = 0.8 e Dividend geleden Dividend yield - 14285 %. a 141. f. Dividend yield = 14%