Exercise 14-2 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 company's common stock at the end of the year was $29. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1,120 9,500 13,600 630 24,850 $ 1,280 6,600 11,500 540 19,920 9,600 45,666 55, 266 $80,116 9,600 42,108 51,708 $71,628 Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital Total paid-in capital Retained earnings Total etarlholdere' amit $18,100 $19,500 1,030 150 20,680 150 19,020 9, 2009 , 200 29,880 28, 220 600 4,000 4,600 45,636 50.236 600 4,000 4,600 38,808 43.408 29,880 28, 220 Total liabilities Stockholders' equity: Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 600 4,000 4,600 45,636 50,236 $80,116 600 4,000 4,600 38,808 43,408 $71,628 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 67,000 $65,000 Cost of goods sold 36,000 33,000 Gross margin 31,000 32,000 Selling and administrative expenses: Selling expenses 11,000 10,500 Administrative expenses 7,200 6,800 Total selling and administrative expenses 18, 200 17,300 Net operating income 12,800 14,700 Interest expense 920 920 Net income before taxes 11,880 13,780 Income taxes 4,752 5,512 Net income 7,128 8,268 Dividends to common stockholders 300 300 Net income added to retained earnings 6,828 7,968 Beginning retained earnings 38,808 30,840 Ending retained earnings $45,636 $38,808 Required: Compute the following financial data and ratios for this year: 1. Working capital. (Enter answer in thousands.) 2. Current ratio. (Round your answer to 2 decimal places.) 3. Acid-test ratio. (Round your answer to 2 decimal places.)
