Exercise 14-3 Financial Ratios for Asset Management (L014-3] 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 the year was $24. All of the company's sales are on account Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1,250 10,700 13,100 640 25,690 $ 1,240 7,100 12,400 620 21,360 9,600 44,916 54,516 $80,206 9,600 39,526 49,176 670,536 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 Acerued liabilities Notes payable, short term Total current liabilition Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $19,400 1,070 130 20,600 $18,400 710 130 19,240 9.400 30,000 9,400 28.640 600 4.000 4,600 45,606 50,206 $80,206 600 4,000 4,600 37, 296 41,896 $70,536 7 coed wester Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $76,540 $65,000 Cost of goods sold 43,350 36,000 Gross margin 33,190 29,000 Selling and administrative expenses Selling expenses 11,000 10,700 Administrative expenses 26.000 6.100 Total selling and administrative expenses 18,000 16.800 Net operating income 15,190 12,200 Interest expense 940 940 Net Income before taxes 14,250 11,260 Income taxes 5,700 4.504 Net Income 8,550 6,756 Dividends to common stockholders 240 300 Net income added to retained earnings 8.310 6,456 Beginning retained earnings 32296 30,840 Ending retained earnings $45,606 $37,296 BOOM Hint Print erences 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 sole 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.) days 1. Accounts receivable turnover 2. Average collection period 3. Inventory turnover 4. Average sale period 5. Operating cycle 6. Total asset turnover daya day 5 (dollars in thousands ) This Year Last Year $67,000 $64,000 42,000 35,000 25,000 29,000 2.16 Joints Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes Net income Dividends to common stockholders Net income added to retained earnings Beginning retained earnings Ending retained earnings eBook 11,400 7,100 18,500 6,500 980 5,520 2,208 3,312 240 3,072 37,242 $40,314 10,200 6,900 17,100 11,900 980 10,920 4,368 6,552 450 6,102 31,140 $37,242 Hint Print References Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier. (For all requirements, round your answers to 2 decimal places.) 1. 2. Times interest earned ratio Debt-to-equity ratio Equity multiplier 3. 6 ELLE $92,000 $87.000 58,500 56,500 33,500 32,500 2.14 points Sales Coat of goods sold Gross margin Selling and administrative expenses Selling expenses Administrative expenses Total selling and adsinistrative expenses Net operating Income Interest expense Net income before taxes Income taxes Net income Dividends to common stockholders Net Income added to retained earningo Beginning retained earnings Ending retained earnings 9,800 13,300 23,100 10,400 1,050 9,350 3,740 5.610 372 5,238 22,960 $33,198 9,300 12,300 21,600 10,900 1.050 9,850 3.940 5,910 744 5,166 22,294 $27,960 eBook Print Required: Compute the following financial data for this year. 1. Gross margin percentage (Round your percentage answer to 1 decimal place (.e. 0.1234 should be entered as 12.3).) 2. Net profit margin percentage. (Round your percentage answer to 1 decimal place (I.e., 0.1234 should be entered as 12.3).) 3. Return on total assets. (Round your percentage answer to 1 decimal place (le, 0.1234 should be entered as 12.3).) 4. Return on equity. (Round your percentage answer to 2 decimal places (ie, 01234 should be entered as 12.34).) References 1. Gross margin percentage 2. Net profit margin percentage 3. Return on total assets 4. Return on equity % %