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 700,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, 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 $26. All of the companys sales are on account.
Weller Corporation Comparative Balance Sheet (dollars in thousands) | ||
This Year | Last Year | |
---|---|---|
Assets | ||
Current assets: | ||
Cash | $ 1,250 | $ 1,340 |
Accounts receivable, net | 10,000 | 8,300 |
Inventory | 12,500 | 12,400 |
Prepaid expenses | 700 | 690 |
Total current assets | 24,450 | 22,730 |
Property and equipment: | ||
Land | 10,000 | 10,000 |
Buildings and equipment, net | 44,509 | 40,037 |
Total property and equipment | 54,509 | 50,037 |
Total assets | $ 78,959 | $ 72,767 |
Liabilities and Stockholders' Equity | ||
Current liabilities: | ||
Accounts payable | $ 19,400 | $ 19,000 |
Accrued liabilities | 1,060 | 850 |
Notes payable, short term | 0 | 180 |
Total current liabilities | 20,460 | 20,030 |
Long-term liabilities: | ||
Bonds payable | 8,300 | 8,300 |
Total liabilities | 28,760 | 28,330 |
Stockholders' equity: | ||
Common stock | 2,000 | 2,000 |
Additional paid-in capital | 4,000 | 4,000 |
Total paid-in capital | 6,000 | 6,000 |
Retained earnings | 44,199 | 38,437 |
Total stockholders' equity | 50,199 | 44,437 |
Total liabilities and stockholders' equity | $ 78,959 | $ 72,767 |
Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) | ||
This Year | Last Year | |
---|---|---|
Sales | $ 66,000 | $ 66,000 |
Cost of goods sold | 37,000 | 36,000 |
Gross margin | 29,000 | 30,000 |
Selling and administrative expenses: | ||
Selling expenses | 10,700 | 10,700 |
Administrative expenses | 7,400 | 6,100 |
Total selling and administrative expenses | 18,100 | 16,800 |
Net operating income | 10,900 | 13,200 |
Interest expense | 830 | 830 |
Net income before taxes | 10,070 | 12,370 |
Income taxes | 4,028 | 4,948 |
Net income | 6,042 | 7,422 |
Dividends to common stockholders | 280 | 525 |
Net income added to retained earnings | 5,762 | 6,897 |
Beginning retained earnings | 38,437 | 31,540 |
Ending retained earnings | $ 44,199 | $ 38,437 |
Required:
Compute the following financial ratios for this year:
1. Times interest earned ratio.
2. Debt-to-equity ratio.
3. Equity multiplier.
(For all requirements, round your answers to 2 decimal places.)
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