Measures of liquidity, Solvency and Profitability The comparative financial stat
ID: 2587472 • Letter: M
Question
Measures of liquidity, Solvency and Profitability
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 65 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 $ 3,591,150 $ 3,025,050 Net income 851,200 619,600 Total $4,442,350 $ 3,644,650 Dividends: On preferred stock $ 10,500 $ 10,500 On common stock 43,000 43,000 Total dividends $ 53,500 $ 53,500 Retained earnings, December 31 $ 4,388,850 $ 3,591,150Explanation / Answer
1. Working capital = Current assets-current liabilities
= 4636332-1598735
Working capital = 3037597
2. Current ratio = Current assets/current liabilities
= 4636332/1598735
Current ratio = 2.9
3. Acid test ratio = (Cash+account receivable+marketable securities)/Current liabilities
= (1061800+1607050+1007400)/1598735
Acid test ratio = 2.3
4. Account receivable turnover = Sales/Average receivable
= 5673560/(1007400+949000/2)
Account receivable turnover = 5.8
5.Number of days' sales in receivables = 365/Account receivable turnover
= 365/5.80
Number of days' sales in receivables = 62.9 days