Measures of liquidity, Solvency and ProfitabilityThe comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 64 on December 31, 20Y2.Marshall Inc.Comparative Retained Earnings StatementFor the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1Retained earnings, January 1$ 3,099,650 $ 2,623,250 Net income681,600 537,300 Total$ 3,781,250 $ 3,160,550 Dividends On preferred stock$ 9,100 $ 9,100 On common stock51,800 51,800 Total dividends$ 60,900 $ 60,900 Retained earnings, December 31$ 3,720,350 $ 3,099,650 Marshall Inc.Comparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1Sales$ 4,210,640 $ 3,879,520 Cost of goods sold1,554,900 1,430,510 Gross profit$ 2,655,740 $ 2,449,010 Selling expenses$ 893,140 $ 1,089,600 Administrative expenses760,830 639,930 Total operating expenses1,653,970 1,729,530 Income from operations$ 1,001,770 $ 719,480 Other income52,730 45,920 $ 1,054,500 $ 765,400 Other expense (interest)280,000 154,400 Income before income tax$ 774,500 $ 611,000 Income tax expense92,900 73,700 Net income$ 681,600 $ 537,300 Marshall Inc.Comparative Balance SheetDecember 31, 20Y2 and 20Y1 Dec. 31, 20Y2 Dec. 31, 20Y1Assets Current assets Cash$ 677,180 $ 613,620 Marketable securities1,024,920 1,016,870 Accounts receivable (net)773,800 730,000 Inventories584,000 452,600 Prepaid expenses128,114 122,720 Total current assets$ 3,188,014 $ 2,935,810 Long-term investments1,971,651 129,700 Property, plant, and equipment (net)4,550,000 4,095,000 Total assets$ 9,709,665 $ 7,160,510 LiabilitiesCurrent liabilities$ 1,099,315 $ 740,860 Long-term liabilities Mortgage note payable, 8 %$ 1,570,000 $ 0 Bonds payable, 8 %1,930,000 1,930,000 Total long-term liabilities$ 3,500,000 $ 1,930,000 Total liabilities$ 4,599,315 $ 2,670,860 Stockholders' Equity Preferred $ 0.70 stock, $ 50 par$ 650,000 $ 650,000 Common stock, $ 10 par740,000 740,000 Retained earnings3,720,350 3,099,650 Total stockholders' equity$ 5,110,350 $ 4,489,650 Total liabilities and stockholders' equity$ 9,709,665 $ 7,160,510 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 capital2. Current ratio3. Quick ratio4. Accounts receivable turnover5. Number of days' sales in receivablesdays6. Inventory turnover7. Number of days' sales in inventorydays8. Ratio of fixed assets to long-term liabilities9. Ratio of liabilities to stockholders' equity10. Times interest earned11. Asset turnover12. Return on total assets%13. Return on stockholders' equity%14.Return on common stockholders' equity%15. Earnings per share on common stock16. Price-earnings ratio17. Dividends per share of common stock18. Dividend yield%%24%24

Financial ratios measure the stability of an organisation. There are many kinds of ratio measure.…

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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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 $ 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	$ 3,099,650		$ 2,623,250
Net income	681,600		537,300
Total	$ 3,781,250		$ 3,160,550
Dividends
	On preferred stock	$ 9,100		$ 9,100
	On common stock	51,800		51,800
		Total dividends	$ 60,900		$ 60,900
Retained earnings, December 31	$ 3,720,350		$ 3,099,650

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1
Sales	$ 4,210,640		$ 3,879,520
Cost of goods sold	1,554,900		1,430,510
Gross profit	$ 2,655,740		$ 2,449,010
Selling expenses	$ 893,140		$ 1,089,600
Administrative expenses	760,830		639,930
Total operating expenses	1,653,970		1,729,530
Income from operations	$ 1,001,770		$ 719,480
Other income	52,730		45,920
	$ 1,054,500		$ 765,400
Other expense (interest)	280,000		154,400
Income before income tax	$ 774,500		$ 611,000
Income tax expense	92,900		73,700
Net income	$ 681,600		$ 537,300

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
	Dec. 31, 20Y2	Dec. 31, 20Y1
Assets
Current assets
	Cash	$ 677,180		$ 613,620
	Marketable securities	1,024,920		1,016,870
	Accounts receivable (net)	773,800		730,000
	Inventories	584,000		452,600
	Prepaid expenses	128,114		122,720
		Total current assets	$ 3,188,014		$ 2,935,810
Long-term investments	1,971,651		129,700
Property, plant, and equipment (net)	4,550,000		4,095,000
Total assets	$ 9,709,665		$ 7,160,510
Liabilities
Current liabilities	$ 1,099,315		$ 740,860
Long-term liabilities
	Mortgage note payable, 8 %	$ 1,570,000		$ 0
	Bonds payable, 8 %	1,930,000		1,930,000
		Total long-term liabilities	$ 3,500,000		$ 1,930,000
Total liabilities	$ 4,599,315		$ 2,670,860
Stockholders' Equity
Preferred $ 0.70 stock, $ 50 par	$ 650,000		$ 650,000
Common stock, $ 10 par	740,000		740,000
Retained earnings	3,720,350		3,099,650
	Total stockholders' equity	$ 5,110,350		$ 4,489,650
Total liabilities and stockholders' equity	$ 9,709,665		$ 7,160,510

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
%
%24
%24

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