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 $ 62 on December 31, 2012. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 2012 and 2041 20Y2 2011 Retained earnings, January 1 $1,569,900 $1,328,700 272,200 Net income 331,200 Dividends: On preferred stock On common stock (11,200) (19,800) (11,200) (19,800) $1,569,900 $1,870,100 Retained earnings, December 31 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 2012 and 2011 20Y2 2011 Sales $2,105,320 740,950 $1,939,760 681,670 Cost of merchandise sold Gross profit Selling expenses Administrative expenses $1,364,370 $473,900 403,690 $1,258,090 $565,070 331,870

Answer 1

Solution:

1) Working Capital Ratio 20Y2

=Total Current Assets – Total Current Liabilities

= $ 1,963,797 - $ 595,090

= $ 1,368,707 (Answer)

2) Current Ratio

= Total Current Assets / Total Current Liabilities

= $ 1,963,797 / $ 595,090

= 3.3 (Answer)

3) Quick Ratio

= Quick Assets* / Total Current Liabilities

= $ 1,581,850 / $ 595,090

= 2.7 (Answer)

*Quick Assets = Total Current Assets –Prepaid Expenses – Inventories

= $ 1,963,797 - $ 89,947 - $ 292,000

= $ 1,581,850

4) Account receivable turnover

= Net sales / Average account receivable*

= $ 2,105,320 / $ 375,950

= 5.6 (Answer)

* Average account receivable = (Account Receivable 20Y2 + Account Receivable 20Y1) / 2

= ($ 386,900 + $ 365,000) / 2

= $ 751,900 / 2

= $ 375,950

Note: I am submitting solution for first four problems as per answering policy.