Question
Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common
Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 830,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the companys common stock at the end of this year was $20. All of the companys sales are on account.
Weller Corporation Comparative Balance Sheet (dollars in thousands) | ||||||
This Year | Last Year | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 5,078 | $ | 5,190 | ||
Accounts receivable, net | 12,600 | 9,250 | ||||
Inventory | 9,850 | 8,320 | ||||
Prepaid expenses | 1,830 | 2,160 | ||||
Total current assets | 29,358 | 24,920 | ||||
Property and equipment: | ||||||
Land | 6,300 | 6,300 | ||||
Buildings and equipment, net | 19,500 | 19,300 | ||||
Total property and equipment | 25,800 | 25,600 | ||||
Total assets | $ | 55,158 | $ | 50,520 | ||
Liabilities and Stockholders' Equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 9,800 | $ | 8,450 | ||
Accrued liabilities | 660 | 850 | ||||
Notes payable, short term | 330 | 330 | ||||
Total current liabilities | 10,790 | 9,630 | ||||
Long-term liabilities: | ||||||
Bonds payable | 8,750 | 8,750 | ||||
Total liabilities | 19,540 | 18,380 | ||||
Stockholders' equity: | ||||||
Common stock | 830 | 830 | ||||
Additional paid-in capital | 4,350 | 4,350 | ||||
Total paid-in capital | 5,180 | 5,180 | ||||
Retained earnings | 30,438 | 26,960 | ||||
Total stockholders' equity | 35,618 | 32,140 | ||||
Total liabilities and stockholders' equity | $ | 55,158 | $ | 50,520 | ||
Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) | ||||||
This Year | Last Year | |||||
Sales | $ | 82,000 | $ | 77,000 | ||
Cost of goods sold | 53,500 | 49,500 | ||||
Gross margin | 28,500 | 27,500 | ||||
Selling and administrative expenses: | ||||||
Selling expenses | 8,800 | 8,300 | ||||
Administrative expenses | 12,300 | 11,300 | ||||
Total selling and administrative expenses | 21,100 | 19,600 | ||||
Net operating income | 7,400 | 7,900 | ||||
Interest expense | 1,050 | 1,050 | ||||
Net income before taxes | 6,350 | 6,850 | ||||
Income taxes | 2,540 | 2,740 | ||||
Net income | 3,810 | 4,110 | ||||
Dividends to common stockholders | 332 | 664 | ||||
Net income added to retained earnings | 3,478 | 3,446 | ||||
Beginning retained earnings | 26,960 | 23,514 | ||||
Ending retained earnings | $ | 30,438 | $ | 26,960 | ||
Required:
Compute the following financial data for this year:
1. Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
2. Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
3. Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
4. Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)
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