Exercise 14-3 (Algo) Financial Ratios for Asset Management [LO14-3]

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 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 $29. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year	Last Year
Assets
Current assets:
Cash	$ 1,150	$ 1,310
Accounts receivable, net	9,300	8,300
Inventory	12,500	11,000
Prepaid expenses	730	570
Total current assets	23,680	21,180
Property and equipment:
Land	10,900	10,900
Buildings and equipment, net	46,261	39,039
Total property and equipment	57,161	49,939
Total assets	$ 80,841	$ 71,119
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 20,400	$ 19,300
Accrued liabilities	900	710
Notes payable, short term	250	250
Total current liabilities	21,550	20,260
Long-term liabilities:
Bonds payable	9,600	9,600
Total liabilities	31,150	29,860
Stockholders' equity:
Common stock	700	700
Additional paid-in capital	4,000	4,000
Total paid-in capital	4,700	4,700
Retained earnings	44,991	36,559
Total stockholders' equity	49,691	41,259
Total liabilities and stockholders' equity	$ 80,841	$ 71,119

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$ 75,680	$ 66,000
Cost of goods sold	42,300	37,000
Gross margin	33,380	29,000
Selling and administrative expenses:
Selling expenses	11,400	11,000
Administrative expenses	6,500	6,800
Total selling and administrative expenses	17,900	17,800
Net operating income	15,480	11,200
Interest expense	960	960
Net income before taxes	14,520	10,240
Income taxes	5,808	4,096
Net income	8,712	6,144
Dividends to common stockholders	280	525
Net income added to retained earnings	8,432	5,619
Beginning retained earnings	36,559	30,940
Ending retained earnings	$ 44,991	$ 36,559

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.)