Question

Measures of liquidity, Solvency and Profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc, common stock was $ 54 on December 31, 2012. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 2012 and 2041 2012 2011 Retained earnings, January 1 $ 1,028,100 $ 870,100 Net income 224,000 178,200 Total $ 1,252,100 $ 1,048,300 $ 7.700 $ 7,700 Dividends On preferred stock On common stock Total dividends Retained earnings, December 31 12.500 12.500 $ 20,200 $ 20,200 $ 1.231,900 $ 1.028,100

Answer 1

1) Working capital= Current assets-Current liabilities

= $1156864-361520= $795344

2) Current ratio= Current assets/Current liabilities

= $1156864/361520= 3.2

3) Quick assets= $265980+402560+248200= $916740

Quick ratio= Quick assets/Current liabilities

= $916740/361520= 2.5

4) Average account receivable= $(248200+233600)/2= $240900

Accounts receivable turnover= Net sales/Average account receivable

= $1421310/240900= 5.9

5) Number of days' sales in receivables= 365/Accounts receivable turnover

= 365/5.9= 61.9 days

6) Average inventory= $(189800+146000)/2= $167900

Inventory turnover ratio= Cost of goods sold/Average inventory

= $486910/167900= 2.9

7) Number of days' sales in inventory= 365/Inventory turnover ratio

= 365/2.9= 125.9 days

8) Ratio of fixed assets to long term liabilities= Total fixed assets/Long term liabilities

= $1100000/1000000= 1.1

9) Ratio of liabilities to shareholders' equity= Total liabilities/Shareholders' equity

= $1361520/1701900= 0.8

10) Time interest earned= (Income before income tax+Interest expense)/Interest expense

= $(254500+80000)/80000= 4.2

11) Average total assets= $(3063420+2365151)/2= $2714285.5

Asset turnover= Net sales/Average total assets

= $1421310/2714285.5= 0.5

12) Return on total assets= Net income*100/Average total assets

= $224000*100/2714285.5= 8.3%

13) Average stockholders' equity= $(1701900+1498100)/2= $1600000

Return on stockholders' equity= Net income*100/Average stockholders' equity

= $224000*100/1600000= 14%

14) Average common stockholders' equity= $(250000+1231900+250000+1028100)/2= $1380000

Return on common stockholders' equity= (Net income-Preferred dividend)*100/Average common stockholders' equity

= $(224000-7700)*100/1380000= 15.7%

15) Earning per share on common stock= (Net income-Preferred dividend)/Weighted average shares outstanding

= $(224000-7700)*100/25000= $8.7

16) Price-earning ratio= Market price per share/Earning price per share

= $54/8.7= 6.2

17) Dividend per share of common stock= Dividend on common stock/Common shares outstanding

= $12500/25000= $0.5

18) Dividend yield ratio= Dividend per share*100/Market price per share

= $0.5*100/54= 0.9%