The comparative financial statements of Marshall Inc. are as follows. The market
ID: 2521972 • Letter: T
Question
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.40 on December 31, 20Y2.
Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Retained earnings, January 1
$3,712,000.00
$3,262,000.00
3
Net income
631,000.00
560,000.00
4
Total
$4,343,000.00
$3,822,000.00
5
Dividends:
6
On preferred stock
$10,000.00
$10,000.00
7
On common stock
100,000.00
100,000.00
8
Total dividends
$110,000.00
$110,000.00
9
Retained earnings, December 31
$4,233,000.00
$3,712,000.00
Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Sales
$10,860,000.00
$10,000,000.00
3
Cost of goods sold
6,000,000.00
5,440,000.00
4
Gross profit
$4,860,000.00
$4,560,000.00
5
Selling expenses
$2,160,000.00
$2,000,000.00
6
Administrative expenses
1,627,500.00
1,500,000.00
7
Total operating expenses
$3,787,500.00
$3,500,000.00
8
Income from operations
$1,072,500.00
$1,060,000.00
9
Other income
99,500.00
20,000.00
10
$1,172,000.00
$1,080,000.00
11
Other expense (interest)
131,000.00
120,000.00
12
Income before income tax
$1,041,000.00
$960,000.00
13
Income tax expense
410,000.00
400,000.00
14
Net income
$631,000.00
$560,000.00
Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Assets
3
Current assets:
4
Cash
$1,050,000.00
$950,000.00
5
Marketable securities
301,000.00
420,000.00
6
Accounts receivable (net)
586,000.00
500,000.00
7
Inventories
410,000.00
380,000.00
8
Prepaid expenses
107,000.00
20,000.00
9
Total current assets
$2,454,000.00
$2,270,000.00
10
Long-term investments
800,000.00
800,000.00
11
Property, plant, and equipment (net)
5,750,000.00
5,184,000.00
12
Total assets
$9,004,000.00
$8,254,000.00
13
Liabilities
14
Current liabilities
$821,000.00
$792,000.00
15
Long-term liabilities:
16
Mortgage note payable, 6%,
$200,000.00
$0.00
17
Bonds payable, 4%,
3,000,000.00
3,000,000.00
18
Total long-term liabilities
$3,200,000.00
$3,000,000.00
19
Total liabilities
$4,021,000.00
$3,792,000.00
20
Stockholders’ Equity
21
Preferred 4% stock, $5 par
$250,000.00
$250,000.00
22
Common stock, $5 par
500,000.00
500,000.00
23
Retained earnings
4,233,000.00
3,712,000.00
24
Total stockholders’ equity
$4,983,000.00
$4,462,000.00
25
Total liabilities and stockholders’ equity
$9,004,000.00
$8,254,000.00
Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): Assume a 365-day year.
Answer 1-18
working capital
Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
Explanation / Answer
1.working capital Current assets-current liabilities 2454000-821000 1633000 2.Current ratio Current assets/current liabilities 2454000/821000 2.99 3.Quick ratio (total current assets-inventory)/Total current liabilities (2454000-410000)/821000 2.49 4.Accounts receivable turnover Net credit sales/average trade receivables 10860000*2/(586000+500000) 20 5.Number of days’ sales in receivables. Accounts receivable* no of days/Credut sales 586000*365/10860000 19.70 6.Inventory turnover Cost of goods sold/Average Inventory 6000000*2/(410000+380000) 15.19 7.Number of days’ sales in inventory Inventory*365/Cost of sales 410000*365/6000000 24.94 8.Ratio of fixed assets to long-term liabilities Fixed assets/long term liabilities (5750000+800000)/3200000 2.05 9.Ratio of liabilities to stockholders’ equity Liabilities/stockholders equity 9004000/4983000 1.81 10.Times interest earned EBIT/Interest expense 1172000/131000 8.95 11.Asset turnover Cost of sales/Assets 6000000/9004000 0.67 12.Return on total assets Net income/total assets 631000/9004000 0.07 13.Return on stockholders’ equity Net Income/Total shareholders equity 631000/4983000 0.13 14.Return on common stockholders’ equity. Net Income/Total common shareholders equity 631000/500000 1.26 15.Earnings per share on common stock Net profit available for common stock/No of Equity shares (4343000-10000)/(500000/5) 43.33 16.Price-earnings ratio Share price/Earnings per share 82.4/43.33 1.90 17.Dividends per share of common stock Dividend amount/No of equity shares 100000/(500000/5) 1 18.Dividend yield Annual dividend/Current stock price 1/82.4 0.01