Exercise 13-2 Financial Ratios for Assessing Liquidity [LO13-2]

Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 500,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 10%. The income tax rate was 40% and the dividend per share of common stock was $1.25 last year and $0.90 this year. The market value of the companys common stock at the end of the year was $22. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year			Last Year
Assets
Current assets:
Cash	$	1,270		$	1,310
Accounts receivable, net		10,500			7,900
Inventory		13,400			11,100
Prepaid expenses		740			550
Total current assets		25,910			20,860
Property and equipment:
Land		9,000			9,000
Buildings and equipment, net		40,009			35,367
Total property and equipment		49,009			44,367
Total assets	$	74,919		$	65,227
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	19,000		$	18,200
Accrued liabilities		910			790
Notes payable, short term		240			240
Total current liabilities		20,150			19,230
Long-term liabilities:
Bonds payable		8,300			8,300
Total liabilities		28,450			27,530
Stockholders' equity:
Common stock		500			500
Additional paid-in capital		4,000			4,000
Total paid-in capital		4,500			4,500
Retained earnings		41,969			33,197
Total stockholders' equity		46,469			37,697
Total liabilities and stockholders' equity	$	74,919		$	65,227

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	73,000		$	65,000
Cost of goods sold		39,000			42,000
Gross margin		34,000			23,000
Selling and administrative expenses:
Selling expenses		10,700			10,700
Administrative expenses		7,100			7,000
Total selling and administrative expenses		17,800			17,700
Net operating income		16,200			5,300
Interest expense		830			830
Net income before taxes		15,370			4,470
Income taxes		6,148			1,788
Net income		9,222			2,682
Dividends to common stockholders		450			625
Net income added to retained earnings		8,772			2,057
Beginning retained earnings		33,197			31,140
Ending retained earnings	$	41,969		$	33,197

Required:

Compute the following financial data and ratios for this year:

1.	Working capital. (Enter your answer in thousands)

2.	Current ratio. (Round your answer to 2 decimal places.)

3.	Acid-test ratio. (Round your answer to 2 decimal places.)