Measures of liquidity, Solvency and Profitability The comparative financial stat
ID: 2589447 • 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 $ 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.
%
days
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 $ 920,050Explanation / Answer
a) Earning per share on common stock = (Earning available for common stock)/No. of outstanding common stock
Earning available for common stock = Net Income - Preferred dividend = 198,800-6,300 = $192,500
No. of outstanding common stock = Total value of Common stock/Par value = $210,000/10 = 21,000
EPS = $192,500/21,000 = $9.17
b) Price Earning Ratio = Market Price per Share/Earning Per Share
= $53/$9.17 = 5.8
c) Dividend per share of common stock = Total common Dividend/No. of outstanding common stock
= $12,600/21,000 = $0.60 per share
d) Dividend Yield = (Dividend per share/market per share)*100 = ($0.60/$53)*100 = 1.1%
e) Quick Ratio = Liquid Assets/Current Liabilities
Liquid Assets = Cash+Marketable Securities+Account Receivable = 218,730+331,050+211,700 = $761,480
Current Liabilities = $291,960
Quick Ratio = $761,480/291,960 = 2.6
f) Number of days sales in receivables = (Accounts Receivable/Sales)*365 days
= (211,700/1,226,400)*365 days = 63 days
g) Number of days sales in inventory = Accounts payable/Cost of goods sold)*365 days
= (291,960/429,970)*365 days = 248 days
It is assumed that Current liabilities includes only Accounts Payable