Exercise 13-3 Financial Ratios for Asset Management [LO13-3]

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 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 $0.40 this year. The market value of the companys common stock at the end of the year was $25. 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		$	1,220
Accounts receivable, net		10,200			6,900
Inventory		13,400			11,900
Prepaid expenses		690			580
Total current assets		25,550			20,600
Property and equipment:
Land		10,400			10,400
Buildings and equipment, net		37,783			35,117
Total property and equipment		48,183			45,517
Total assets	$	73,733		$	66,117
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	20,300		$	17,800
Accrued liabilities		930			900
Notes payable, short term		160			160
Total current liabilities		21,390			18,860
Long-term liabilities:
Bonds payable		9,800			9,800
Total liabilities		31,190			28,660
Stockholders' equity:
Common stock		500			500
Additional paid-in capital		4,000			4,000
Total paid-in capital		4,500			4,500
Retained earnings		38,043			32,957
Total stockholders' equity		42,543			37,457
Total liabilities and stockholders' equity	$	73,733		$	66,117

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	73,530		$	65,000
Cost of goods sold		45,540			42,000
Gross margin		27,990			23,000
Selling and administrative expenses:
Selling expenses		11,300			10,800
Administrative expenses		6,900			6,900
Total selling and administrative expenses		18,200			17,700
Net operating income		9,790			5,300
Interest expense		980			980
Net income before taxes		8,810			4,320
Income taxes		3,524			1,728
Net income		5,286			2,592
Dividends to common stockholders		200			375
Net income added to retained earnings		5,086			2,217
Beginning retained earnings		32,957			30,740
Ending retained earnings	$	38,043		$	32,957

Required:

Compute the following financial data for this year:

1.	Accounts receivable turnover. (Assume that all sales are on account.) (Round your answer to 2 decimal places.)

2.	Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)

3.	Inventory turnover. (Round your answer to 2 decimal places.)

4.	Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)

5.	Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.)

6.	Total asset turnover. (Round your answer to 2 decimal places.)