Question

Measures of liquidity, The ability of a company to make its periodic interest payments and repay the face amount of debt at maturity.Solvency, and The ability of a firm to generate earnings.Profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 61 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			$ 1,654,075		$ 1,400,225
Net income			384,800		286,800
Total			$2,038,875		$ 1,687,025
Dividends:
	On preferred stock		$ 6,300		$ 6,300
	On common stock		26,650		26,650
		Total dividends	$ 32,950		$ 32,950
Retained earnings, December 31			$ 2,005,925		$ 1,654,075

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 2,144,740		$ 1,976,030
Cost of goods sold	825,630		759,580
Gross profit	$ 1,319,110		$ 1,216,450
Selling expenses	$ 410,010		$ 523,560
Administrative expenses	349,270		307,490
Total operating expenses	$759,280		$831,050
Income from operations	$ 559,830		$ 385,400
Other revenue	29,470		24,600
	$ 589,300		$ 410,000
Other expense (interest)	152,000		84,000
Income before income tax	$ 437,300		$ 326,000
Income tax expense	52,500		39,200
Net income	$ 384,800		$ 286,800

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$ 410,790		$ 416,310
	Marketable securities		621,730		689,880
	Accounts receivable (net)		423,400		401,500
	Inventories		321,200		248,200
	Prepaid expenses		77,712		83,260
		Total current assets	$ 1,854,832		$ 1,839,150
Long-term investments			1,329,426		765,592
Property, plant, and equipment (net)			2,090,000		1,881,000
Total assets			$ 5,274,258		$ 4,485,742
Liabilities
Current liabilities			$ 598,333		$ 1,011,667
Long-term liabilities:
	Mortgage note payable, 8%		$ 850,000		$ 0
	Bonds payable, 8%		1,050,000		1,050,000
		Total long-term liabilities	$ 1,900,000		$ 1,050,000
Total liabilities			$ 2,498,333		$ 2,061,667
Stockholders' Equity
Preferred $0.70 stock, $40 par			$ 360,000		$ 360,000
Common stock, $10 par			410,000		410,000
Retained earnings			2,005,925		1,654,075
Total stockholders' equity			$ 2,775,925		$ 2,424,075
Total liabilities and stockholders' equity			$ 5,274,258		$ 4,485,742

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.

5. The relationship between sales and accounts receivable, computed by dividing the average accounts receivable by the average daily sales.Number of days' sales in receivables		days
6. The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory.Inventory turnover
7. The relationship between the volume of sales and inventory, computed by dividing average inventory by the average daily cost of goods sold.Number of days' sales in inventory		days
8. A solvency ratio that measures how much fixed assets a company has to support its long-term debt.Ratio of fixed assets to long-term liabilities
9. A comprehensive leverage ratio that measures the relationship of the claims of creditors to stockholders' equity, calculated as total liabilities divided by total stockholders' equity.Ratio of liabilities to stockholders' equity

Answer 1

Answer 2

To provide a comprehensive analysis of Marshall Inc.'s liquidity, solvency, and profitability based on the given information, we would need access to the comparative financial statements of the company. Without the specific financial data, it is not possible to calculate the measures of liquidity, solvency, and profitability accurately.

However, I can briefly explain these measures to help you understand their significance:

1. Liquidity: Liquidity refers to the ability of a company to meet its short-term obligations and pay off its debts as they become due. It measures the company's ability to convert its assets into cash quickly. Common measures of liquidity include the current ratio (current assets divided by current liabilities) and the quick ratio (liquid assets divided by current liabilities).

2. Solvency: Solvency indicates a company's ability to meet its long-term obligations and remain financially stable in the long run. It assesses whether a company's assets are sufficient to cover its liabilities. The debt-to-equity ratio (total debt divided by total equity) and interest coverage ratio (earnings before interest and taxes divided by interest expense) are commonly used measures of solvency.

3. Profitability: Profitability measures a company's ability to generate earnings and make a profit from its operations. It assesses the efficiency and effectiveness of the company in utilizing its resources to generate income. Common measures of profitability include gross profit margin (gross profit divided by revenue), net profit margin (net income divided by revenue), return on assets (net income divided by total assets), and return on equity (net income divided by total equity).

Without the specific financial data of Marshall Inc., it is not possible to determine the liquidity, solvency, and profitability ratios for the company. I recommend referring to the company's financial statements or consulting with a financial professional to obtain accurate and up-to-date information