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			$1,313,800		$1,116,700
Net income			284,000		228,700
Total			$1,597,800		$1,345,400
Dividends:
	On preferred stock		$9,100		$9,100
	On common stock		22,500		22,500
		Total dividends	$31,600		$31,600
Retained earnings, December 31			$1,566,200		$1,313,800

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$1,626,075		$1,498,220
Cost of goods sold	613,200		564,140
Gross profit	$1,012,875		$934,080
Selling expenses	$328,060		$400,390
Administrative expenses	279,455		235,150
Total operating expenses	$607,515		$635,540
Income from operations	$405,360		$298,540
Other revenue	21,340		19,060
	$426,700		$317,600
Other expense (interest)	104,000		57,600
Income before income tax	$322,700		$260,000
Income tax expense	38,700		31,300
Net income	$284,000		$228,700

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			20Y2		20Y1
Assets
Current assets
	Cash		$274,860		$284,090
	Marketable securities		416,010		470,770
	Accounts receivable (net)		306,600		284,700
	Inventories		233,600		175,200
	Prepaid expenses		52,002		56,820
		Total current assets	$1,283,072		$1,271,580
Long-term investments			854,088		308,831
Property, plant, and equipment (net)			1,690,000		1,521,000
Total assets			$3,827,160		$3,101,411
Liabilities
Current liabilities			$400,960		$507,611
Long-term liabilities:
	Mortgage note payable, 8%		$580,000		$0
	Bonds payable, 8%		720,000		720,000
		Total long-term liabilities	$1,300,000		$720,000
Total liabilities			$1,700,960		$1,227,611
Stockholders' Equity
Preferred $0.70 stock, $20 par			$260,000		$260,000
Common stock, $10 par			300,000		300,000
Retained earnings			1,566,200		1,313,800
Total stockholders' equity			$2,126,200		$1,873,800
Total liabilities and stockholders' equity			$3,827,160		$3,101,411

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

Solution

1	Working Capital	(Current Assets - Current Liabilites)	(1283072 - 400960)	$    8,82,112.00
2	Current Ratio	(Current Assets / Current Liabilites)	(1283072 / 400960)	3.2
3	Quick Ratio	[ (Current Assets - Inventories) / Current Liabilities ]	[(1283072-233600)/400960]	2.6
4	Accounts Receivable Turnover	(Sales/Average Accounts Receivable)	(1626075/295650)	5.5
	Average Accounts Receivable	(Opening Acc. Recv. + Cloising Acc. Recv.) / 2	[(284700+306600)/2]	$    2,95,650.00
5	No. of Days Sales in Receivable	(365 / Accounts Receivable Turnover)	(365/5.5)	66	Days
6	Inventory Turnover	(Cost of Goods Sold / Average Inventory)	(613200/204400)	3.0
	Average Inventory	(Opening Stock + Closing Stock) / 2	[(175200+233600)/2]	$    2,04,400.00
7	No. of Days Sales in Inventory	(365 / Inventory Turnover Ratio)	(365/3)	122	Days
8	Ratio of Fixed Assets to Long-term Liabilities	(Fixed Assets / Long-term Liabilities)	(1690000/1300000)	1.3
9	Ratio of Liabilities to Stockholders' Equity	(Total Liabilities / Stockholders' Equity)	(1700960/2126200)	0.8
10	Times Interest Earned	(Total Operating Income / Interest Expenses)	(426700/104000)	4.1
11	Asset Turnover	(Sales/Average Total Assets)	(1626075/3464285.50)	0.5
	Average Total Assets	(Opening Asset Balance + Closing Asset Balance) / 2	[(3101411+3827160)/2]	$ 34,64,285.50
12	Return on Total Asset	(Total Operating Income / Average Total Asset)	(426700/3464285.5)	12.3	%
13	Return on Stockholders Equity	(Net Income / Total Stockholders' Equity)	(284000/2126200)	13.4	%
14	Return on Common Stockholders' Equity	(Net Income after Preference Dividend/ Common Stockholders' Equity)	(284000 - 9100/300000)	91.6	%
	Preference Dividend	(No. of Preferred Stock X Dividend per share)	[(260000/20)X0.70]	9100
15	Earning Per Share on Common Stock	(Net Income after Preference Dividend/ No of. Common Stockholders' Equity)	(274900/30000)	$                  9.16
16	Price-Earning Ratio	(Market Price Per Share / Earnings Per Share)	(64/9.16)	7.0
17	Dividend Per Share of Common Stock	(Total Divisible Profit / No. Of Common Stockholders' Equity)	(22500/30000)	$                  0.75
	Total Divisible Profit	[274900 - (1566200 - 1313800)]		$       22,500.00
18	Dividend Yield	(Dividend Per Share / Market Price per Share)	(0.75/64)	1.2	%