Measures of liquidity, Solvency, and ProfitabilityThe comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 57 on December 31, 20Y2.Marshall Inc.Comparative Retained Earnings StatementFor the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1Retained earnings, January 1$3,910,550 $3,323,050 Net income852,000 680,600 Total$4,762,550 $4,003,650 Dividends: On preferred stock$11,200 $11,200 On common stock81,900 81,900 Total dividends$93,100 $93,100 Retained earnings, December 31$4,669,450 $3,910,550 Marshall Inc.Comparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1Sales$5,721,375 $5,271,400 Cost of goods sold2,124,300 1,954,360 Gross profit$3,597,075 $3,317,040 Selling expenses$1,228,220 $1,493,630 Administrative expenses1,046,265 877,210 Total operating expenses$2,274,485 $2,370,840 Income from operations$1,322,590 $946,200 Other revenue69,610 60,400 $1,392,200 $1,006,600 Other expense (interest)424,000 233,600 Income before income tax$968,200 $773,000 Income tax expense116,200 92,400 Net income$852,000 $680,600 Marshall Inc.Comparative Balance SheetDecember 31, 20Y2 and 20Y1 20Y2 20Y1Assets Current assets Cash$1,466,330 $780,090 Marketable securities2,219,300 1,292,730 Accounts receivable (net)1,073,100 1,007,400 Inventories803,000 613,200 Prepaid expenses277,413 156,020 Total current assets$5,839,143 $3,849,440 Long-term investments1,727,702 292,429 Property, plant, and equipment (net)5,830,000 5,247,000 Total assets$13,396,845 $9,388,869 LiabilitiesCurrent liabilities$1,717,395 $848,319 Long-term liabilities: Mortgage note payable, 8%$2,380,000 $0 Bonds payable, 8%2,920,000 2,920,000 Total long-term liabilities$5,300,000 $2,920,000 Total liabilities$7,017,395 $3,768,319 Stockholders' Equity Preferred $0.70 stock, $50 par$800,000 $800,000 Common stock, $10 par910,000 910,000 Retained earnings4,669,450 3,910,550 Total stockholders' equity$6,379,450 $5,620,550 Total liabilities and stockholders' equity$13,396,845 $9,388,869 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' equity0%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

Working Capital = Current Assets - Current Liabilities Working Capital = $5,839,143 - $1,717,395…

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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 common stock was $ 57 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	$3,910,550		$3,323,050
Net income	852,000		680,600
Total	$4,762,550		$4,003,650
Dividends:
	On preferred stock	$11,200		$11,200
	On common stock	81,900		81,900
		Total dividends	$93,100		$93,100
Retained earnings, December 31	$4,669,450		$3,910,550

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1
Sales	$5,721,375		$5,271,400
Cost of goods sold	2,124,300		1,954,360
Gross profit	$3,597,075		$3,317,040
Selling expenses	$1,228,220		$1,493,630
Administrative expenses	1,046,265		877,210
Total operating expenses	$2,274,485		$2,370,840
Income from operations	$1,322,590		$946,200
Other revenue	69,610		60,400
	$1,392,200		$1,006,600
Other expense (interest)	424,000		233,600
Income before income tax	$968,200		$773,000
Income tax expense	116,200		92,400
Net income	$852,000		$680,600

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
	20Y2	20Y1
Assets
Current assets
	Cash	$1,466,330		$780,090
	Marketable securities	2,219,300		1,292,730
	Accounts receivable (net)	1,073,100		1,007,400
	Inventories	803,000		613,200
	Prepaid expenses	277,413		156,020
		Total current assets	$5,839,143		$3,849,440
Long-term investments	1,727,702		292,429
Property, plant, and equipment (net)	5,830,000		5,247,000
Total assets	$13,396,845		$9,388,869
Liabilities
Current liabilities	$1,717,395		$848,319
Long-term liabilities:
	Mortgage note payable, 8%	$2,380,000		$0
	Bonds payable, 8%	2,920,000		2,920,000
		Total long-term liabilities	$5,300,000		$2,920,000
Total liabilities	$7,017,395		$3,768,319
Stockholders' Equity
Preferred $0.70 stock, $50 par	$800,000		$800,000
Common stock, $10 par	910,000		910,000
Retained earnings	4,669,450		3,910,550
Total stockholders' equity	$6,379,450		$5,620,550
Total liabilities and stockholders' equity	$13,396,845		$9,388,869

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
0%
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

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