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 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 $22. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year	Last Year
Assets
Current assets:
Cash	$ 1,260	$ 1,290
Accounts receivable, net	10,900	6,700
Inventory	12,900	11,600
Prepaid expenses	670	530
Total current assets	25,730	20,120
Property and equipment:
Land	9,100	9,100
Buildings and equipment, net	48,483	38,938
Total property and equipment	57,583	48,038
Total assets	$ 83,313	$ 68,158
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 18,600	$ 19,000
Accrued liabilities	950	860
Notes payable, short term	170	170
Total current liabilities	19,720	20,030
Long-term liabilities:
Bonds payable	8,700	8,700
Total liabilities	28,420	28,730
Stockholders' equity:
Common stock	600	600
Additional paid-in capital	4,000	4,000
Total paid-in capital	4,600	4,600
Retained earnings	50,293	34,828
Total stockholders' equity	54,893	39,428
Total liabilities and stockholders' equity	$ 83,313	$ 68,158

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$ 82,720	$ 65,000
Cost of goods sold	37,975	41,000
Gross margin	44,745	24,000
Selling and administrative expenses:
Selling expenses	10,800	10,300
Administrative expenses	6,900	6,100
Total selling and administrative expenses	17,700	16,400
Net operating income	27,045	7,600
Interest expense	870	870
Net income before taxes	26,175	6,730
Income taxes	10,470	2,692
Net income	15,705	4,038
Dividends to common stockholders	240	450
Net income added to retained earnings	15,465	3,588
Beginning retained earnings	34,828	31,240
Ending retained earnings	$ 50,293	$ 34,828

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.)

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.)