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

Weller Corporation Comparative Balance Sheet (dollars in thousands) This YearLast YearAssets Current assets: Cash$ 1,120$ 1,210Accounts receivable, net9,7008,000Inventory13,20011,400Prepaid expenses690530Total current assets24,71021,140Property and equipment: Land10,80010,800Buildings and equipment, net41,30035,520Total property and equipment52,10046,320Total assets$ 76,810$ 67,460Liabilities and Stockholders' Equity Current liabilities: Accounts payable$ 20,000$ 18,500Accrued liabilities1,040810Notes payable, short term300300Total current liabilities21,34019,610Long-term liabilities: Bonds payable8,5008,500Total liabilities29,84028,110Stockholders' equity: Common stock600600Additional paid-in capital4,0004,000Total paid-in capital4,6004,600Retained earnings42,37034,750Total stockholders' equity46,97039,350Total liabilities and stockholders' equity$ 76,810$ 67,460

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This YearLast YearSales$ 71,000$ 65,000Cost of goods sold39,00040,000Gross margin32,00025,000Selling and administrative expenses: Selling expenses10,60010,000Administrative expenses7,1006,900Total selling and administrative expenses17,70016,900Net operating income14,3008,100Interest expense850850Net income before taxes13,4507,250Income taxes5,3802,900Net income8,0704,350Dividends to common stockholders450240Net income added to retained earnings7,6204,110Beginning retained earnings34,75030,640Ending retained earnings$ 42,370$ 34,750

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.)