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 $25. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands) This YearLast YearAssets Current assets: Cash$ 1,100$ 1,290Accounts receivable, net10,5006,800Inventory12,20011,300Prepaid expenses800530Total current assets24,60019,920Property and equipment: Land11,00011,000Buildings and equipment, net48,23637,798Total property and equipment59,23648,798Total assets$ 83,836$ 68,718Liabilities and Stockholders' Equity Current liabilities: Accounts payable$ 18,700$ 19,300Accrued liabilities960830Notes payable, short term260260Total current liabilities19,92020,390Long-term liabilities: Bonds payable8,7008,700Total liabilities28,62029,090Stockholders' equity: Common stock600600Additional paid-in capital4,0004,000Total paid-in capital4,6004,600Retained earnings50,61635,028Total stockholders' equity55,21639,628Total liabilities and stockholders' equity$ 83,836$ 68,718

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This YearLast YearSales$ 77,850$ 65,000Cost of goods sold32,90041,000Gross margin44,95024,000Selling and administrative expenses: Selling expenses10,80010,300Administrative expenses6,9006,100Total selling and administrative expenses17,70016,400Net operating income27,2507,600Interest expense870870Net income before taxes26,3806,730Income taxes10,5522,692Net income15,8284,038Dividends to common stockholders240450Net income added to retained earnings15,5883,588Beginning retained earnings35,02831,440Ending retained earnings$ 50,616$ 35,028

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.)

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 company's common stock at the end of this year was $25. All of the company's sales are on account Required: Compute the following financial data for this year: 1. Accounts receivable turnover (Assume that all sales are on account) (Round your onswer to 2 decimal ploces.) 2. Average collection period. (Use 365 doys in a yeor. Round your intermediote colculotions and final onswer to 2 decimal places.) 3. Inventory turnover. (Round your onswer to 2 decimal places.) 4. Average sale period. (Use 365 days in a yeor. Round your intermediate calculations and finol answer to 2 decimal places.) 5 . Operating cycle. (Round your intermediate calculations and final onswer to 2 decimol places.) 6. Total asset tumover (Round your onswer to 2 decimol ploces.)