Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 64 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			$ 4,159,100		$ 3,518,300
Net income			921,600		720,600
Total			$5,080,700		$ 4,238,900
Dividends:
	On preferred stock		$ 11,900		$ 11,900
	On common stock		67,900		67,900
		Total dividends	$ 79,800		$ 79,800
Retained earnings, December 31			$ 5,000,900		$ 4,159,100

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 5,450,910		$ 5,022,190
Cost of goods sold	1,949,100		1,793,170
Gross profit	$ 3,501,810		$ 3,229,020
Selling expenses	$ 1,185,450		$ 1,442,200
Administrative expenses	1,009,830		847,010
Total operating expenses	$2,195,280		$2,289,210
Income from operations	$ 1,306,530		$ 939,810
Other revenue	68,770		59,990
	$ 1,375,300		$ 999,800
Other expense (interest)	328,000		180,800
Income before income tax	$ 1,047,300		$ 819,000
Income tax expense	125,700		98,400
Net income	$ 921,600		$ 720,600

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$ 921,420		$ 974,710
	Marketable securities		1,394,590		1,615,230
	Accounts receivable (net)		985,500		927,100
	Inventories		730,000		569,400
	Prepaid expenses		174,322		194,940
		Total current assets	$ 4,205,832		$ 4,281,380
Long-term investments			3,151,788		1,733,000
Property, plant, and equipment (net)			4,920,000		4,428,000
Total assets			$ 12,277,620		$ 10,442,380
Liabilities
Current liabilities			$ 1,356,720		$ 2,203,280
Long-term liabilities:
	Mortgage note payable, 8%		$ 1,840,000		$ 0
	Bonds payable, 8%		2,260,000		2,260,000
		Total long-term liabilities	$ 4,100,000		$ 2,260,000
Total liabilities			$ 5,456,720		$ 4,463,280
Stockholders' Equity
Preferred $0.70 stock, $50 par			$ 850,000		$ 850,000
Common stock, $10 par			970,000		970,000
Retained earnings			5,000,900		4,159,100
Total stockholders' equity			$ 6,820,900		$ 5,979,100
Total liabilities and stockholders' equity			$ 12,277,620		$ 10,442,380

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

			20Y2
1	Working Capital	Current Asset - Current Liabilities	$2849112	=4205832-1356720
2	Current ratio	Current Assets / Current Liabilities	3.1	=4205832/1356720
3	Quick Ratio	(Current Assets - Inventory - Prepaid Expenses )/Current Liabilities	2.4	=(4205832-730000-174332)/1356720
4	Accounts Receivables turnover	Net Credit Sales / Average Accounts receivable	1.4	=5450910/(985500+927100)/2
5	Number of days' sales in receivables	365 days / Receivables turnover ratio	260.7 Days	=365/1.4
6	Inventory Turnover	Cost of goods sold / average inventory	0.2	=1949100/(730000+5694000)/2
7	Number of days' sales in inventory	365 days / inventory turnover ratio	182.5 Days	=365/2
8	Ratio of fixed assets to long-term liabilities	Total Fixed Assets / Long term Liabilities	2.0	=(4920000+3151788)/4100000
9	Ratio of liabilities to stockholders' equity	Total liabilities /Shareholder's equity	0.8	=5456720/6820900
10	Times interest earned	Earnings before interest and taxes / total interest	4.2 Times	=1375300/328000
11	Asset turnover	Net sales / average total assets	0.1	=5450910/(12277620+10442380)/2
12	Return on total assets	Net income / total assets	7.5%	=921600/12277620
13	Return on Stockholders equity	Net income / Stockholders equity	13.5%	=921600/6820900
14	Return on common stockholders’ equity	Net income / Common shareholder's equity	15.4%	=921600/(6820900-850000)
15	Earnings per share	(Net Income - Preferred Dividend )/ Total no of common shares	$9.38	=(921600-11900)/97000
16	Price-earnings ratio	Current share price / Earnings per share	6.8	=64/9.38
17	Dividend per share on common stock	Dividend to common stock holders / Total number of common stock	$0.70	=67900/97000
18	Dividend yield	Dividend Per share/ Current Share Price	1.1%	=0.7/64