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 600,000 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 $21. All of the companys sales are on account.
Weller Corporation Comparative Balance Sheet (dollars in thousands) | ||
This Year | Last Year | |
---|---|---|
Assets | ||
Current assets: | ||
Cash | $ 1,260 | $ 1,390 |
Accounts receivable, net | 10,700 | 7,100 |
Inventory | 13,700 | 12,000 |
Prepaid expenses | 750 | 540 |
Total current assets | 26,410 | 21,030 |
Property and equipment: | ||
Land | 9,500 | 9,500 |
Buildings and equipment, net | 45,698 | 41,474 |
Total property and equipment | 55,198 | 50,974 |
Total assets | $ 81,608 | $ 72,004 |
Liabilities and Stockholders' Equity | ||
Current liabilities: | ||
Accounts payable | $ 19,000 | $ 17,700 |
Accrued liabilities | 990 | 840 |
Notes payable, short term | 0 | 210 |
Total current liabilities | 19,990 | 18,750 |
Long-term liabilities: | ||
Bonds payable | 9,600 | 9,600 |
Total liabilities | 29,590 | 28,350 |
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 | 46,018 | 37,654 |
Total stockholders' equity | 52,018 | 43,654 |
Total liabilities and stockholders' equity | $ 81,608 | $ 72,004 |
Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) | ||
This Year | Last Year | |
---|---|---|
Sales | $ 71,000 | $ 65,000 |
Cost of goods sold | 38,000 | 35,000 |
Gross margin | 33,000 | 30,000 |
Selling and administrative expenses: | ||
Selling expenses | 10,600 | 10,200 |
Administrative expenses | 7,100 | 6,900 |
Total selling and administrative expenses | 17,700 | 17,100 |
Net operating income | 15,300 | 12,900 |
Interest expense | 960 | 960 |
Net income before taxes | 14,340 | 11,940 |
Income taxes | 5,736 | 4,776 |
Net income | 8,604 | 7,164 |
Dividends to common stockholders | 240 | 450 |
Net income added to retained earnings | 8,364 | 6,714 |
Beginning retained earnings | 37,654 | 30,940 |
Ending retained earnings | $ 46,018 | $ 37,654 |
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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