Measures of liquidity, Solvency and Profitability The comparative financial stat

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 $ 53 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 $ 920,050 $ 779,350 Net income 198,800 159,600 Total $ 1,081,050 $ 938,950 Dividends On preferred stock $ 6,300 $ 6,300 On common stock 12,600 12,600 Total dividends $ 18,900 $ 18,900 Retained earnings, December 31 $ 1,099,950 $ 920,050

Explanation / Answer

Answer: Ratio of fixed assets to long term liabilities :

Average fixed assets: (20Y1 +20Y2)/2 : (990000+891000)/2 : $940500

Average long term liabilties:(20Y1 +20Y2)/2 : (900000+500000)/2 : 700000

Ratio : avg. fixed assets / avg long term liabilities: $940500/700000 = 1.34

Ratio of liabitlities to stockholders equity:

Average liabitlies : (20Y1 +20Y2)/2 : (1191960 +887319)/2 : 1039640

Average stockholders equity : (20Y1 +20Y2)/2 : (1489950 +1310050)/2 : 1400000

Ratio : 1039640 /1400000 = 0.7426

Times interest earned : EBIT/ Total interest payable

EBIT: 297900

Interest : 72000

Times interest earned =$297900/72000 = 4.13

Asset turnover : Net sales/average total assets

Average total assets:(20Y1 +20Y2)/2 =(2197369 +2681910)/ 2: 2439640

Net sales : 1226400

Asset turnover : 1226400/2439640 : 0.5026

Return on total assets : Net income / average total assets

Net income: 198800 /2439640 = 0.0814

Return on stockholders equity = net income / average stockholders equity

= 198800/1400000 = 0.142

Return on common stockholders equity : net income / Average common stockholders equity

= 198800/210000 = 0.9466

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---