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 $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 | $ 1,150 | $ 1,320 |
Accounts receivable, net | 10,700 | 8,400 |
Inventory | 12,100 | 12,300 |
Prepaid expenses | 610 | 530 |
Total current assets | 24,560 | 22,550 |
Property and equipment: | ||
Land | 9,900 | 9,900 |
Buildings and equipment, net | 44,123 | 39,579 |
Total property and equipment | 54,023 | 49,479 |
Total assets | $ 78,583 | $ 72,029 |
Liabilities and Stockholders' Equity | ||
Current liabilities: | ||
Accounts payable | $ 20,000 | $ 18,500 |
Accrued liabilities | 1,100 | 830 |
Notes payable, short term | 0 | 270 |
Total current liabilities | 21,100 | 19,600 |
Long-term liabilities: | ||
Bonds payable | 8,100 | 8,100 |
Total liabilities | 29,200 | 27,700 |
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 | 43,383 | 38,329 |
Total stockholders' equity | 49,383 | 44,329 |
Total liabilities and stockholders' equity | $ 78,583 | $ 72,029 |
Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) | ||
This Year | Last Year | |
---|---|---|
Sales | $ 68,000 | $ 64,000 |
Cost of goods sold | 40,000 | 32,000 |
Gross margin | 28,000 | 32,000 |
Selling and administrative expenses: | ||
Selling expenses | 11,300 | 10,700 |
Administrative expenses | 7,000 | 6,800 |
Total selling and administrative expenses | 18,300 | 17,500 |
Net operating income | 9,700 | 14,500 |
Interest expense | 810 | 810 |
Net income before taxes | 8,890 | 13,690 |
Income taxes | 3,556 | 5,476 |
Net income | 5,334 | 8,214 |
Dividends to common stockholders | 280 | 525 |
Net income added to retained earnings | 5,054 | 7,689 |
Beginning retained earnings | 38,329 | 30,640 |
Ending retained earnings | $ 43,383 | $ 38,329 |
Required:
Compute the following financial ratios for this year:
1. Times interest earned ratio.
2. Debt-to-equity ratio.
3. Equity multiplier.
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