The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 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 $3,704,000 $3,264,000 Net income $ 600,000 $ 550,000 Dividends: On preferred stock (10,000) (10,000) On common stock (100,000) (100,000) Increase in retained earnings $ 490,000 $ 440,000 Retained earnings, December 31 $4,194,000 $3,704,000 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $ 10,850,000 $10,000,000 Cost of goods sold (6,000,000) (5,450,000) Gross profit $ 4,850,000 $ 4,550,000 Selling expenses $ (2,170,000) $ (2,000,000) Administrative expenses (1,627,500) (1,500,000) Total operating expenses $(3,797,500) $ (3,500,000) Operating income $ 1,052,500 $ 1,050,000 Other revenue and expense: Other revenue 99,500 20,000 Other expense (interest) (132,000) (120,000) Income before income tax expense $ 1,020,000 $ 950,000 Income tax expense (420,000) (400,000) Net income $ 600,000 $ 550,000 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: Cash $1,050,000 $ 950,000 Marketable securities 301,000 420,000 Accounts receivable (net) 585,000 500,000 Inventories 420,000 380,000 Prepaid expenses 108,000 20,000 Total current assets $ 2,464,000 $2,270,000 Long-term investments 800,000 800,000 Property, plant, and equipment (net) 5,760,000 5,184,000 Total assets $ 9,024,000 $8,254,000 Liabilities Current liabilities $ 880,000 $ 800,000 Long-term liabilities: Mortgage note payable, 6% $ 200,000 $ 0 Bonds payable, 4% 3,000,000 3,000,000 Total long-term liabilities $ 3,200,000 $3,000,000 Total liabilities $ 4,080,000 $3,800,000 Stockholders’ Equity Preferred 4% stock, $5 par $ 250,000 $ 250,000 Common stock, $5 par 500,000 500,000 Retained earnings 4,194,000 3,704,000 Total stockholders’ equity $ 4,944,000 $4,454,000 Total liabilities and stockholders’ equity $ 9,024,000 $8,254,000 Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent. 1. Working Capital $fill in the blank 1 2. Current ratio fill in the blank 2 3. Quick ratio fill in the blank 3 4. Accounts receivable turnover fill in the blank 4 5. Number of days’ sales in receivables fill in the blank 5 6. Inventory turnover fill in the blank 6 7. Number of days’ sales in inventory fill in the blank 7 8. Ratio of fixed assets to long-term liabilities fill in the blank 8 9. Ratio of liabilities to stockholders’ equity fill in the blank 9 10. Times interest earned fill in the blank 10 11. Asset turnover fill in the blank 11 12. Return on total assets fill in the blank 12 % 13. Return on stockholders’ equity fill in the blank 13 % 14. Return on common stockholders’ equity fill in the blank 14 % 15. Earnings per share on common stock $fill in the blank 15 16. Price-earnings ratio fill in the blank 16 17. Dividends per share of common stock $fill in the blank 17 18. Dividend yield fill in the blank 18 %
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2.
Marshall Inc. | ||
Comparative |
||
For the Years Ended December 31, 20Y2 and 20Y1 | ||
20Y2 | 20Y1 | |
Retained earnings, January 1 | $3,704,000 | $3,264,000 |
Net income | $ 600,000 | $ 550,000 |
Dividends: | ||
On |
(10,000) | (10,000) |
On common stock | (100,000) | (100,000) |
Increase in retained earnings | $ 490,000 | $ 440,000 |
Retained earnings, December 31 | $4,194,000 | $3,704,000 |
Marshall Inc. | ||
Comparative Income Statement | ||
For the Years Ended December 31, 20Y2 and 20Y1 | ||
20Y2 | 20Y1 | |
Sales | $ 10,850,000 | $10,000,000 |
Cost of goods sold | (6,000,000) | (5,450,000) |
Gross profit | $ 4,850,000 | $ 4,550,000 |
Selling expenses | $ (2,170,000) | $ (2,000,000) |
Administrative expenses | (1,627,500) | (1,500,000) |
Total operating expenses | $(3,797,500) | $ (3,500,000) |
Operating income | $ 1,052,500 | $ 1,050,000 |
Other revenue and expense: | ||
Other revenue | 99,500 | 20,000 |
Other expense (interest) | (132,000) | (120,000) |
Income before income tax expense | $ 1,020,000 | $ 950,000 |
Income tax expense | (420,000) | (400,000) |
Net income | $ 600,000 | $ 550,000 |
Marshall Inc. | ||
Comparative Balance Sheet | ||
December 31, 20Y2 and 20Y1 | ||
20Y2 | 20Y1 | |
Assets | ||
Current assets: | ||
Cash | $1,050,000 | $ 950,000 |
Marketable securities | 301,000 | 420,000 |
585,000 | 500,000 | |
Inventories | 420,000 | 380,000 |
Prepaid expenses | 108,000 | 20,000 |
Total current assets | $ 2,464,000 | $2,270,000 |
Long-term investments | 800,000 | 800,000 |
Property, plant, and equipment (net) | 5,760,000 | 5,184,000 |
Total assets | $ 9,024,000 | $8,254,000 |
Liabilities | ||
Current liabilities | $ 880,000 | $ 800,000 |
Long-term liabilities: | ||
Mortgage note payable, 6% | $ 200,000 | $ 0 |
Bonds payable, 4% | 3,000,000 | 3,000,000 |
Total long-term liabilities | $ 3,200,000 | $3,000,000 |
Total liabilities | $ 4,080,000 | $3,800,000 |
Preferred 4% stock, $5 par | $ 250,000 | $ 250,000 |
Common stock, $5 par | 500,000 | 500,000 |
Retained earnings | 4,194,000 | 3,704,000 |
Total stockholders’ equity | $ 4,944,000 | $4,454,000 |
Total liabilities and stockholders’ equity | $ 9,024,000 | $8,254,000 |
Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent.
1. |
$fill in the blank 1 | |
2. |
fill in the blank 2 | |
3. Quick ratio | fill in the blank 3 | |
4. Accounts receivable turnover | fill in the blank 4 | |
5. Number of days’ sales in receivables | fill in the blank 5 | |
6. Inventory turnover | fill in the blank 6 | |
7. Number of days’ sales in inventory | fill in the blank 7 | |
8. Ratio of fixed assets to long-term liabilities | fill in the blank 8 | |
9. Ratio of liabilities to stockholders’ equity | fill in the blank 9 | |
10. Times interest earned | fill in the blank 10 | |
11. Asset turnover | fill in the blank 11 | |
12. Return on total assets | fill in the blank 12 | % |
13. Return on stockholders’ equity | fill in the blank 13 | % |
14. Return on common stockholders’ equity | fill in the blank 14 | % |
15. Earnings per share on common stock | $fill in the blank 15 | |
16. Price-earnings ratio | fill in the blank 16 | |
17. Dividends per share of common stock | $fill in the blank 17 | |
18. Dividend yield | fill in the blank 18 | % |
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