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 $ 69 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 $ 1,410,800 $ 1,200,800
Net income 334,400 246,000
Total $ 1,673,200 $ 1,446,800
Dividends
On preferred stock $ 10,500 $ 10,500
On common stock 25,500 25,500
Total dividends $ 36,000 $ 36,000
Retained earnings, December 31 $ 1,709,200 $ 1,410,800
Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
20Y2 20Y1
Sales $ 2,222,850 $ 2,047,980
Cost of goods sold 740,950 681,670
Gross profit $ 1,481,900 $ 1,366,310
Selling expenses $ 523,210 $ 642,850
Administrative expenses 445,690 377,540
Total operating expenses 968,900 1,020,390
Income from operations $ 513,000 $ 345,920
Other income 27,000 22,080
$ 540,000 $ 368,000
Other expense (interest) 160,000 88,000
Income before income tax $ 380,000 $ 280,000
Income tax expense 45,600 34,000
Net income $ 334,400 $ 246,000
Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
Dec. 31, 20Y2 Dec. 31, 20Y1
Assets
Current assets
Cash $ 416,090 $ 375,050
Marketable securities 629,760 621,510
Accounts receivable (net) 394,200 372,300
Inventories 292,000 219,000
Prepaid expenses 78,722 75,010
Total current assets $ 1,810,772 $ 1,662,870
Long-term investments 522,548 52,901
Property, plant, and equipment (net) 2,600,000 2,340,000
Total assets $ 4,933,320 $ 4,055,771
Liabilities
Current liabilities $ 584,120 $ 904,971
Long-term liabilities
Mortgage note payable, 8 % $ 900,000 $ 0
Bonds payable, 8 % 1,100,000 1,100,000
Total long-term liabilities $ 2,000,000 $ 1,100,000
Total liabilities $ 2,584,120 $ 2,004,971
Stockholders' Equity
Preferred $ 0.70 stock, $ 20 par $ 300,000 $ 300,000
Common stock, $ 10 par 340,000 340,000
Retained earnings 1,709,200 1,410,800
Total stockholders' equity $ 2,349,200 $ 2,050,800
Total liabilities and stockholders' equity $ 4,933,320 $ 4,055,771
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
%
| 1 | Working capital= | Current Assets- Current Liabilities | ||||
| =1810772- 584120 | ||||||
| 12,26,652 | ||||||
| 2 | Current ratio | Current Assets/Current Liabilities | ||||
| =1810772/584120 | ||||||
| 3.1 | ||||||
| 3 | Quick Ratio | (Cash +Account Receivable+ Short term Investment)/ Current liabilities | ||||
| =416090+629760+394200)/584,120 | ||||||
| 2.5 | ||||||
| 4 | Account receivable Turnover | Net Credit Sales/Average account receivable | ||||
| =2222850/(394200+372300)/2 | ||||||
| 5.8 | ||||||
| 5 | Number of days' sales in receivables days | =Accounts receivable / (annual sales / 365 days) | ||||
| =394200/(2222850/365) | ||||||
| 65 | ||||||
| 6 | Inventory turnover | Cost of goods sold/Average inventory | ||||
| =740950/(292000+219000)/2 | ||||||
| 2.9 | ||||||
| 7 | Number of days' sales in inventory days | 365/Inventory turnover ratio | ||||
| =365/2.9 | ||||||
| 126 | ||||||
| 8 | Ratio of fixed assets to long-term liabilities | Fixed Assets/ Long term Liabilities | ||||
| =2600000/2000000 | ||||||
| 1.3 | ||||||
| 9 | Ratio of liabilities to stockholders' equity | Total Liabilities/Stockholder's equity | ||||
| =4933320/2349200 | ||||||
| 2.1 | ||||||
| 10 | Times interest earned | Income before Interest and Taxes/Interest Expense | ||||
| =513000/160000 | ||||||
| 3.20625 | ||||||
| 11 | Asset turnover | Net Sales/Average Fixed Assets | ||||
| =2222850/(2600000+2340000)/2 | ||||||
| 0.90 | ||||||
| 12 | Return on total assets | Income before Interest and Taxes/Average Total Assets | ||||
| =513000/(4933320+4055771)/2 | ||||||
| 11.4% | ||||||
| 13 | Return on stockholders’ equity % | Net Income/Shareholder's Equity | ||||
| =334400/2349200 | ||||||
| 14% | ||||||
| 14 | Return on common stockholders’ equity % | (Net Income-Preferred Dividend)/Average common Stockholders' equity | ||||
| =(334400-10500)/[(2349200+2050800)/2-(300000+300000)/2)] | ||||||
| 17% | ||||||
| 15 | Earnings per share on common stock $ | Net income-Preferred dividend/Outstanding shares | ||||
| =(334400-10500)/49000 | ||||||
| 6.6 | ||||||
| 16 | Price-earnings ratio | Share Price/Earning per share | ||||
| =69/6.6 | ||||||
| 10.45 | ||||||
| 17 | Dividends per share of common stock $ | Dividend Paid/Number of common stock outstanding | ||||
| =25500/34000 | ||||||
| 0.75 | ||||||
| 18 | Dividend yield % | Annual Dividend/Current Stock Price | ||||
| =36000/69 | ||||||
| 521.7391 | ||||||
| Note- | ||||||
| Best effort have been made to answer the question correctly, in case of any discrepencies kindly comment and i will try to resolve it as soon as possible. | ||||||
| Please provide positive feedback. | ||||||
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