Exercise 14-2 (Algo) Financial Ratios for Assessing Liquidity [LO14-2]

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	$ 1,220
Accounts receivable, net	10,700	7,300
Inventory	13,800	11,200
Prepaid expenses	630	540
Total current assets	26,390	20,260
Property and equipment:
Land	9,200	9,200
Buildings and equipment, net	37,674	38,412
Total property and equipment	46,874	47,612
Total assets	$ 73,264	$ 67,872
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 19,500	$ 17,500
Accrued liabilities	1,090	770
Notes payable, short term	140	140
Total current liabilities	20,730	18,410
Long-term liabilities:
Bonds payable	9,300	9,300
Total liabilities	30,030	27,710
Stockholders' equity:
Common stock	600	600
Additional paid-in capital	4,000	4,000
Total paid-in capital	4,600	4,600
Retained earnings	38,634	35,562
Total stockholders' equity	43,234	40,162
Total liabilities and stockholders' equity	$ 73,264	$ 67,872

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$ 68,000	$ 64,000
Cost of goods sold	43,000	39,000
Gross margin	25,000	25,000
Selling and administrative expenses:
Selling expenses	11,000	10,100
Administrative expenses	7,200	6,700
Total selling and administrative expenses	18,200	16,800
Net operating income	6,800	8,200
Interest expense	930	930
Net income before taxes	5,870	7,270
Income taxes	2,348	2,908
Net income	3,522	4,362
Dividends to common stockholders	450	240
Net income added to retained earnings	3,072	4,122
Beginning retained earnings	35,562	31,440
Ending retained earnings	$ 38,634	$ 35,562

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.)