The comparative financial statements of Marshall Inc. are as follows. The market
ID: 2331184 • Letter: T
Question
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 62 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 $ 4,522,850 $ 3,836,750 Net income 994,000 785,800 Total $ 5,317,450 $ 4,622,550 Dividends On preferred stock $ 13,300 $ 13,300 On common stock 86,400 86,400 Total dividends $ 99,700 $ 99,700 Retained earnings, December 31 $ 5,417,150 $ 4,522,850 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $ 5,929,425 $ 5,463,030 Cost of goods sold 2,195,110 2,019,500 Gross profit $ 3,734,315 $ 3,443,530 Selling expenses $ 1,252,420 $ 1,523,090 Administrative expenses 1,066,875 894,520 Total operating expenses 2,319,295 2,417,610 Income from operations $ 1,415,020 $ 1,025,920 Other income 74,480 65,480 $ 1,489,500 $ 1,091,400 Other expense (interest) 360,000 198,400 Income before income tax $ 1,129,500 $ 893,000 Income tax expense 135,500 107,200 Net income $ 994,000 $ 785,800 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Current assets Cash $ 923,910 $ 978,820 Marketable securities 1,398,350 1,622,040 Accounts receivable (net) 1,073,100 1,007,400 Inventories 803,000 613,200 Prepaid expenses 174,800 195,760 Total current assets $ 4,373,160 $ 4,417,220 Long-term investments 3,631,710 1,496,481 Property, plant, and equipment (net) 5,400,000 4,860,000 Total assets $ 13,404,870 $ 10,773,701 Liabilities Current liabilities $ 1,457,720 $ 1,740,851 Long-term liabilities Mortgage note payable, 8 % $ 2,020,000 $ 0 Bonds payable, 8 % 2,480,000 2,480,000 Total long-term liabilities $ 4,500,000 $ 2,480,000 Total liabilities $ 5,957,720 $ 4,220,851 Stockholders' Equity Preferred $ 0.70 stock, $ 50 par $ 950,000 $ 950,000 Common stock, $ 10 par 1,080,000 1,080,000 Retained earnings 5,417,150 4,522,850 Total stockholders' equity $ 7,447,150 $ 6,552,850 Total liabilities and stockholders' equity $ 13,404,870 $ 10,773,701 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 %
Explanation / Answer
Answer 1.
Working Capital = Current Assets - Current Liabilities
Working Capital = $4,373,160 - $1,457,720
Working Capital = $2,915,440
Answer 2.
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $4,373,160 / $1,457,720
Current Ratio = 3.00
Answer 3.
Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities
Quick Ratio = ($4,373,160 - $803,000 - $174,800) / $1,457,720
Quick Ratio = 2.33
Answer 4.
Average Accounts Receivable = ($1,073,100 + $1,007,400) / 2
Average Accounts Receivable = $1,040,250
Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $5,929,425 / $1,040,250
Accounts Receivable Turnover = 5.70
Answer 5
Number of Days’ Sales in Receivable = 365 / Accounts Receivable Turnover
Number of Days’ Sales in Receivable = 365 / 5.70
Number of Days’ Sales in Receivable = 64.04 days