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 $23. 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	$ 1,250
Accounts receivable, net	10,400	6,500
Inventory	13,400	11,500
Prepaid expenses	660	640
Total current assets	25,600	19,890
Property and equipment:
Land	10,400	10,400
Buildings and equipment, net	40,999	38,916
Total property and equipment	51,399	49,316
Total assets	$ 76,999	$ 69,206
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 20,000	$ 18,200
Accrued liabilities	960	810
Notes payable, short term	270	270
Total current liabilities	21,230	19,280
Long-term liabilities:
Bonds payable	8,900	8,900
Total liabilities	30,130	28,180
Stockholders' equity:
Common stock	700	700
Additional paid-in capital	4,000	4,000
Total paid-in capital	4,700	4,700
Retained earnings	42,169	36,326
Total stockholders' equity	46,869	41,026
Total liabilities and stockholders' equity	$ 76,999	$ 69,206

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$ 73,515	$ 65,000
Cost of goods sold	44,820	38,000
Gross margin	28,695	27,000
Selling and administrative expenses:
Selling expenses	11,100	10,200
Administrative expenses	6,500	6,600
Total selling and administrative expenses	17,600	16,800
Net operating income	11,095	10,200
Interest expense	890	890
Net income before taxes	10,205	9,310
Income taxes	4,082	3,724
Net income	6,123	5,586
Dividends to common stockholders	280	700
Net income added to retained earnings	5,843	4,886
Beginning retained earnings	36,326	31,440
Ending retained earnings	$ 42,169	$ 36,326

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.)