Question

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 59 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			$ 3,340,100		$ 2,813,600
Net income			769,600		576,300
Total			$4,109,700		$ 3,389,900
Dividends:
	On preferred stock		$ 9,800		$ 9,800
	On common stock		40,000		40,000
		Total dividends	$ 49,800		$ 49,800
Retained earnings, December 31			$ 4,059,900		$ 3,340,100

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$ 4,797,560		$ 4,420,210
Cost of goods sold	1,799,450		1,655,490
Gross profit	$ 2,998,110		$ 2,764,720
Selling expenses	$ 981,580		$ 1,234,020
Administrative expenses	836,160		724,740
Total operating expenses	1,817,740		1,958,760
Income from operations	$ 1,180,370		$ 805,960
Other revenue	62,130		51,440
	$ 1,242,500		$ 857,400
Other expense (interest)	368,000		202,400
Income before income tax	$ 874,500		$ 655,000
Income tax expense	104,900		78,700
Net income	$ 769,600		$ 576,300

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
			Dec. 31, 20Y2		Dec. 31, 20Y1
Assets
Current assets
	Cash		$ 1,021,530		$ 718,160
	Marketable securities		1,546,090		1,190,090
	Accounts receivable (net)		934,400		876,000
	Inventories		700,800		540,200
	Prepaid expenses		193,261		143,630
		Total current assets	$ 4,396,081		$ 3,468,080
Long-term investments			2,219,709		436,643
Property, plant, and equipment (net)			5,060,000		4,554,000
Total assets			$ 11,675,790		$ 8,458,723
Liabilities
Current liabilities			$ 1,515,890		$ 1,088,623
Long-term liabilities
	Mortgage note payable, 8 %		$ 2,070,000		$ 0
	Bonds payable, 8 %		2,530,000		2,530,000
		Total long-term liabilities	$ 4,600,000		$ 2,530,000
Total liabilities			$ 6,115,890		$ 3,618,623
Stockholders' Equity
Preferred $ 0.70 stock, $ 50 par			$ 700,000		$ 700,000
Common stock, $ 10 par			800,000		800,000
Retained earnings			4,059,900		3,340,100
Total stockholders' equity			$ 5,559,900		$ 4,840,100
Total liabilities and stockholders' equity			$ 11,675,790		$ 8,458,723

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

1) Working Capital = Current Assets - Current Liabilities

= $4396081 - $1515890

= $2880191

2) Current Ratio = Current assets / Current Liabilities

= $4396081 / $1515890

= 2.9 times

3) Quick Ratio = (Current Assets - Inventory - Prepaid Expense) / Current Liabilities

= ($4396081 - $700800 - $193261) / $1515890

= $3502020 / $1515890

= 2.31 times

4) Accounts Receivable Turnover = Net Credit Sales / Avg. Accounts Receivable

= $4797560 / (($934400+$876000)/2)

= $4797560 / $905200

= 5.3 times

5) No. of Days Sales in Receivable = 365 days / Accounts Receivable Turnover

= 365 / 5.3

= 68.87 days or 69 days

6) Inventory Turnover = Cost of Goods Sold / Avg. Inventory

= $1799450 / (($700800+$540200)/2)

= $1799450 / $620500

= 2.9 times

7) No. of Days sales in Inventory = 365 days / Inventory Turnover

= 365 / 2.9

= 125.86 days or 126 days