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 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 $28. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year	Last Year
Assets
Current assets:
Cash	$ 1,140	$ 1,320
Accounts receivable, net	10,400	6,600
Inventory	12,400	11,100
Prepaid expenses	620	630
Total current assets	24,560	19,650
Property and equipment:
Land	10,000	10,000
Buildings and equipment, net	48,475	40,920
Total property and equipment	58,475	50,920
Total assets	$ 83,035	$ 70,570
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 19,900	$ 18,500
Accrued liabilities	990	860
Notes payable, short term	190	190
Total current liabilities	21,080	19,550
Long-term liabilities:
Bonds payable	9,000	9,000
Total liabilities	30,080	28,550
Stockholders' equity:
Common stock	700	700
Additional paid-in capital	4,000	4,000
Total paid-in capital	4,700	4,700
Retained earnings	48,255	37,320
Total stockholders' equity	52,955	42,020
Total liabilities and stockholders' equity	$ 83,035	$ 70,570

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$ 74,000	$ 65,000
Cost of goods sold	36,000	37,000
Gross margin	38,000	28,000
Selling and administrative expenses:
Selling expenses	11,100	10,000
Administrative expenses	6,900	6,000
Total selling and administrative expenses	18,000	16,000
Net operating income	20,000	12,000
Interest expense	900	900
Net income before taxes	19,100	11,100
Income taxes	7,640	4,440
Net income	11,460	6,660
Dividends to common stockholders	525	280
Net income added to retained earnings	10,935	6,380
Beginning retained earnings	37,320	30,940
Ending retained earnings	$ 48,255	$ 37,320

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