Asked on 31 Mar 2020

Measures of liquidity, solvency, and profitability

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 $  
2. Current ratio  
3. Quick ratio  
4. Accounts receivable turnover  
5. Number of days’ sales in receivables  
6. Inventory turnover  
7. Number of days’ sales in inventory  
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

Answered on 31 Mar 2020

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