Exercise $16-5($Algo$)$ Financial Ratios for Assessing Profitability $[$LO$16-5]$

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 $850,000$ 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 $$0\mathrm{.}75$ last year and $$0\mathrm{.}40$ this year. The market value of the company$$s common stock at the end of this year was $$20.$ All of the company$$s sales are on account.

Weller Corporation

Comparative Balance Sheet

$($dollars in thousands$)$

This Year Last Year

Assets

Current assets:

Cash $ $1,810$ $ $710$

Accounts receivable, net $12,80010,000$

Inventory $9,9508,400$

Prepaid expenses $1,8502,200$

Total current assets $26,41021,310$

Property and equipment:

Land $6,5006,500$

Buildings and equipment, net $19,70019,500$

Total property and equipment $26,20026,000$

Total assets $ $52,610$ $ $47,310$

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ $10,000$ $ $8,550$

Accrued liabilities $700950$

Notes payable, short term $350350$

Total current liabilities $11,0509,850$

Long$-$term liabilities:

Bonds payable $5,0005,000$

Total liabilities $16,05014,850$

Stockholders' equity:

Common stock $850850$

Additional paid$-$in capital $4,4504,450$

Total paid$-$in capital $5,3005,300$

Retained earnings $31,26027,160$

Total stockholders' equity $36,56032,460$

Total liabilities and stockholders' equity $ $52,610$ $ $47,310$

Weller Corporation

Comparative Income Statement and Reconciliation

$($dollars in thousands$)$

This Year Last Year

Sales $ $84,000$ $ $79,000$

Cost of goods sold $54,50050,500$

Gross margin $29,50028,500$

Selling and administrative expenses:

Selling expenses $9,0008,500$

Administrative expenses $12,50011,500$

Total selling and administrative expenses $21,50020,000$

Net operating income $8,0008,500$

Interest expense $600600$

Net income before taxes $7,4007,900$

Income taxes $2,9603,160$

Net income $4,4404,740$

Dividends to common stockholders $340680$

Net income added to retained earnings $4,1004,060$

Beginning retained earnings $27,16023,100$

Ending retained earnings $ $31,260$ $ $27,160$

Required:

Compute the following financial data for this year:

Gross margin percentage.

Note: Round your percentage answer to $1$ decimal place $($i$.$e$.,0\mathrm{.}1234$ should be entered as $12\mathrm{.}3).$

Net profit margin percentage.

Note: Round your percentage answer to $1$ decimal place $($i$.$e$.,0\mathrm{.}1234$ should be entered as $12\mathrm{.}3).$

Return on total assets.

Note: Round your percentage answer to $1$ decimal place $($i$.$e$.,0\mathrm{.}1234$ should be entered as $12\mathrm{.}3).$

Return on equity.

Note: Round your percentage answer to $2$ decimal places $($i$.$e$.,0\mathrm{.}1234$ should be entered as $12\mathrm{.}34).$