Measures of liquidity, solvency, and profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 $3,704,000 $3,264,000 Net income $ 600,000 $ 550,000 Dividends: On preferred stock (10,000) (10,000) On common stock (100,000) (100,000) Increase in retained earnings $ 490,000 $ 440,000 Retained earnings, December 31 $4,194,000 $3,704,000 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $ 10,850,000 $10,000,000 Cost of goods sold (6,000,000) (5,450,000) Gross profit $ 4,850,000 $ 4,550,000 Selling expenses $ (2,170,000) $ (2,000,000) Administrative expenses (1,627,500) (1,500,000) Total operating expenses $(3,797,500) $ (3,500,000) Operating income $ 1,052,500 $ 1,050,000 Other revenue and expense: Other revenue 99,500 20,000 Other expense (interest) (132,000) (120,000) Income before income tax expense $ 1,020,000 $ 950,000 Income tax expense (420,000) (400,000) Net income $ 600,000 $ 550,000 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: Cash $1,050,000 $ 950,000 Marketable securities 301,000 420,000 Accounts receivable (net) 585,000 500,000 Inventories 420,000 380,000 Prepaid expenses 108,000 20,000 Total current assets $ 2,464,000 $2,270,000 Long-term investments 800,000 800,000 Property, plant, and equipment (net) 5,760,000 5,184,000 Total assets $ 9,024,000 $8,254,000 Liabilities Current liabilities $ 880,000 $ 800,000 Long-term liabilities: Mortgage note payable, 6% $ 200,000 $ 0 Bonds payable, 4% 3,000,000 3,000,000 Total long-term liabilities $ 3,200,000 $3,000,000 Total liabilities $ 4,080,000 $3,800,000 Stockholders’ Equity Preferred 4% stock, $5 par $ 250,000 $ 250,000 Common stock, $5 par 500,000 500,000 Retained earnings 4,194,000 3,704,000 Total stockholders’ equity $ 4,944,000 $4,454,000 Total liabilities and stockholders’ equity $ 9,024,000 $8,254,000 Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent. 1. Working Capital $fill in the blank 1 2. Current ratio fill in the blank 2 3. Quick ratio fill in the blank 3 4. Accounts receivable turnover fill in the blank 4 5. Number of days’ sales in receivables fill in the blank 5 6. Inventory turnover fill in the blank 6 7. Number of days’ sales in inventory fill in the blank 7 8. Ratio of fixed assets to long-term liabilities fill in the blank 8 9. Ratio of liabilities to stockholders’ equity fill in the blank 9 10. Times interest earned fill in the blank 10 11. Asset turnover fill in the blank 11 12. Return on total assets fill in the blank 12 % 13. Return on stockholders’ equity fill in the blank 13 % 14. Return on common stockholders’ equity fill in the blank 14 % 15. Earnings per share on common stock $fill in the blank 15 16. Price-earnings ratio fill in the blank 16 17. Dividends per share of common stock $fill in the blank 17 18. Dividend yield fill in the blank 18 %

Measures of liquidity, solvency, and profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 $3,704,000 $3,264,000 Net income $ 600,000 $ 550,000 Dividends: On preferred stock (10,000) (10,000) On common stock (100,000) (100,000) Increase in retained earnings $ 490,000 $ 440,000 Retained earnings, December 31 $4,194,000 $3,704,000 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $ 10,850,000 $10,000,000 Cost of goods sold (6,000,000) (5,450,000) Gross profit $ 4,850,000 $ 4,550,000 Selling expenses $ (2,170,000) $ (2,000,000) Administrative expenses (1,627,500) (1,500,000) Total operating expenses $(3,797,500) $ (3,500,000) Operating income $ 1,052,500 $ 1,050,000 Other revenue and expense: Other revenue 99,500 20,000 Other expense (interest) (132,000) (120,000) Income before income tax expense $ 1,020,000 $ 950,000 Income tax expense (420,000) (400,000) Net income $ 600,000 $ 550,000 Marshall Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: Cash $1,050,000 $ 950,000 Marketable securities 301,000 420,000 Accounts receivable (net) 585,000 500,000 Inventories 420,000 380,000 Prepaid expenses 108,000 20,000 Total current assets $ 2,464,000 $2,270,000 Long-term investments 800,000 800,000 Property, plant, and equipment (net) 5,760,000 5,184,000 Total assets $ 9,024,000 $8,254,000 Liabilities Current liabilities $ 880,000 $ 800,000 Long-term liabilities: Mortgage note payable, 6% $ 200,000 $ 0 Bonds payable, 4% 3,000,000 3,000,000 Total long-term liabilities $ 3,200,000 $3,000,000 Total liabilities $ 4,080,000 $3,800,000 Stockholders’ Equity Preferred 4% stock, $5 par $ 250,000 $ 250,000 Common stock, $5 par 500,000 500,000 Retained earnings 4,194,000 3,704,000 Total stockholders’ equity $ 4,944,000 $4,454,000 Total liabilities and stockholders’ equity $ 9,024,000 $8,254,000 Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent. 1. Working Capital $fill in the blank 1 2. Current ratio fill in the blank 2 3. Quick ratio fill in the blank 3 4. Accounts receivable turnover fill in the blank 4 5. Number of days’ sales in receivables fill in the blank 5 6. Inventory turnover fill in the blank 6 7. Number of days’ sales in inventory fill in the blank 7 8. Ratio of fixed assets to long-term liabilities fill in the blank 8 9. Ratio of liabilities to stockholders’ equity fill in the blank 9 10. Times interest earned fill in the blank 10 11. Asset turnover fill in the blank 11 12. Return on total assets fill in the blank 12 % 13. Return on stockholders’ equity fill in the blank 13 % 14. Return on common stockholders’ equity fill in the blank 14 % 15. Earnings per share on common stock $fill in the blank 15 16. Price-earnings ratio fill in the blank 16 17. Dividends per share of common stock $fill in the blank 17 18. Dividend yield fill in the blank 18 %

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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Measures of liquidity, solvency, and profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2.

Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1
Retained earnings, January 1	$3,704,000	$3,264,000
Net income	$ 600,000	$ 550,000
Dividends:
On preferred stock	(10,000)	(10,000)
On common stock	(100,000)	(100,000)
Increase in retained earnings	$ 490,000	$ 440,000
Retained earnings, December 31	$4,194,000	$3,704,000

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1
Sales	$ 10,850,000	$10,000,000
Cost of goods sold	(6,000,000)	(5,450,000)
Gross profit	$ 4,850,000	$ 4,550,000
Selling expenses	$ (2,170,000)	$ (2,000,000)
Administrative expenses	(1,627,500)	(1,500,000)
Total operating expenses	$(3,797,500)	$ (3,500,000)
Operating income	$ 1,052,500	$ 1,050,000
Other revenue and expense:
Other revenue	99,500	20,000
Other expense (interest)	(132,000)	(120,000)
Income before income tax expense	$ 1,020,000	$ 950,000
Income tax expense	(420,000)	(400,000)
Net income	$ 600,000	$ 550,000

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
	20Y2	20Y1
Assets
Current assets:
Cash	$1,050,000	$ 950,000
Marketable securities	301,000	420,000
Accounts receivable (net)	585,000	500,000
Inventories	420,000	380,000
Prepaid expenses	108,000	20,000
Total current assets	$ 2,464,000	$2,270,000
Long-term investments	800,000	800,000
Property, plant, and equipment (net)	5,760,000	5,184,000
Total assets	$ 9,024,000	$8,254,000
Liabilities
Current liabilities	$ 880,000	$ 800,000
Long-term liabilities:
Mortgage note payable, 6%	$ 200,000	$ 0
Bonds payable, 4%	3,000,000	3,000,000
Total long-term liabilities	$ 3,200,000	$3,000,000
Total liabilities	$ 4,080,000	$3,800,000
Stockholders’ Equity
Preferred 4% stock, $5 par	$ 250,000	$ 250,000
Common stock, $5 par	500,000	500,000
Retained earnings	4,194,000	3,704,000
Total stockholders’ equity	$ 4,944,000	$4,454,000
Total liabilities and stockholders’ equity	$ 9,024,000	$8,254,000

Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent.

1. Working Capital	$fill in the blank 1
2. Current ratio	fill in the blank 2
3. Quick ratio	fill in the blank 3
4. Accounts receivable turnover	fill in the blank 4
5. Number of days’ sales in receivables	fill in the blank 5
6. Inventory turnover	fill in the blank 6
7. Number of days’ sales in inventory	fill in the blank 7
8. Ratio of fixed assets to long-term liabilities	fill in the blank 8
9. Ratio of liabilities to stockholders’ equity	fill in the blank 9
10. Times interest earned	fill in the blank 10
11. Asset turnover	fill in the blank 11
12. Return on total assets	fill in the blank 12	%
13. Return on stockholders’ equity	fill in the blank 13	%
14. Return on common stockholders’ equity	fill in the blank 14	%
15. Earnings per share on common stock	$fill in the blank 15
16. Price-earnings ratio	fill in the blank 16
17. Dividends per share of common stock	$fill in the blank 17
18. Dividend yield	fill in the blank 18	%

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Measures of liquidity, solvency, and profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2.

Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1
Retained earnings, January 1	$3,704,000	$3,264,000
Net income	$ 600,000	$ 550,000
Dividends:
On preferred stock	(10,000)	(10,000)
On common stock	(100,000)	(100,000)
Increase in retained earnings	$ 490,000	$ 440,000
Retained earnings, December 31	$4,194,000	$3,704,000

Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1
Sales	$ 10,850,000	$10,000,000
Cost of goods sold	(6,000,000)	(5,450,000)
Gross profit	$ 4,850,000	$ 4,550,000
Selling expenses	$ (2,170,000)	$ (2,000,000)
Administrative expenses	(1,627,500)	(1,500,000)
Total operating expenses	$(3,797,500)	$ (3,500,000)
Operating income	$ 1,052,500	$ 1,050,000
Other revenue and expense:
Other revenue	99,500	20,000
Other expense (interest)	(132,000)	(120,000)
Income before income tax expense	$ 1,020,000	$ 950,000
Income tax expense	(420,000)	(400,000)
Net income	$ 600,000	$ 550,000

Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
	20Y2	20Y1
Assets
Current assets:
Cash	$1,050,000	$ 950,000
Marketable securities	301,000	420,000
Accounts receivable (net)	585,000	500,000
Inventories	420,000	380,000
Prepaid expenses	108,000	20,000
Total current assets	$ 2,464,000	$2,270,000
Long-term investments	800,000	800,000
Property, plant, and equipment (net)	5,760,000	5,184,000
Total assets	$ 9,024,000	$8,254,000
Liabilities
Current liabilities	$ 880,000	$ 800,000
Long-term liabilities:
Mortgage note payable, 6%	$ 200,000	$ 0
Bonds payable, 4%	3,000,000	3,000,000
Total long-term liabilities	$ 3,200,000	$3,000,000
Total liabilities	$ 4,080,000	$3,800,000
Stockholders’ Equity
Preferred 4% stock, $5 par	$ 250,000	$ 250,000
Common stock, $5 par	500,000	500,000
Retained earnings	4,194,000	3,704,000
Total stockholders’ equity	$ 4,944,000	$4,454,000
Total liabilities and stockholders’ equity	$ 9,024,000	$8,254,000

Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent.

1. Working Capital	$fill in the blank 1
2. Current ratio	fill in the blank 2
3. Quick ratio	fill in the blank 3
4. Accounts receivable turnover	fill in the blank 4
5. Number of days’ sales in receivables	fill in the blank 5
6. Inventory turnover	fill in the blank 6
7. Number of days’ sales in inventory	fill in the blank 7
8. Ratio of fixed assets to long-term liabilities	fill in the blank 8
9. Ratio of liabilities to stockholders’ equity	fill in the blank 9
10. Times interest earned	fill in the blank 10
11. Asset turnover	fill in the blank 11
12. Return on total assets	fill in the blank 12	%
13. Return on stockholders’ equity	fill in the blank 13	%
14. Return on common stockholders’ equity	fill in the blank 14	%
15. Earnings per share on common stock	$fill in the blank 15
16. Price-earnings ratio	fill in the blank 16
17. Dividends per share of common stock	$fill in the blank 17
18. Dividend yield	fill in the blank 18	%

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