Measures of liquidity, Solvency and Profitability The comparative financial stat
ID: 2584414 • Letter: M
Question
Measures of liquidity, Solvency and Profitability
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 56 on December 31, 20Y2.
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.
Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 $ 1,942,900 $ 1,649,000 Net income 438,000 337,700 Total $ 2,293,300 $ 1,986,700 Dividends On preferred stock $ 7,000 $ 7,000 On common stock 36,800 36,800 Total dividends $ 43,800 $ 43,800 Retained earnings, December 31 $ 2,337,100 $ 1,942,900Explanation / Answer
1. Working capital = Current assets-current liabilities
= 2303126-677390
Working capital = 1625736
2. Current ratio = Current assets/current liabilities
= (2303126/677390)
Current ratio = 3.4:1
3) Quick ratio = (Cash+marketable securities+account receivable)/Current liabilities
= (536140+811450+489100)/677390
Quick ratio = 2.7:1
4) Account receivable turnover = Sales/average receivable
= 2609750/474500
Account receivable turnover = 5.5 Times
5) No of days sales receivable = 365/account receivable turnover
= 365/5.5
No. of days sales receivable = 66.4 days