Exercise 14-3 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 company's common stock at the end of the year was $26. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1,100 9,600 12,900 620 24,220 $ 1,340 6,600 10,800 630 19,370 10,400 41,670 52,070 $ 76,290 10,400 36,455 46,855 $66,225 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 Accrued liabilities Notes payable, short term Total current liabilities 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 $18,700 900 190 19,790 $ 18,400 890 190 19,480 8,500 28,290 8,500 27,980 700 4,000 4,700 43,300 48,000 $ 76,290 700 4,000 4,700 33,545 38,245 $66,225 Weller Corporation Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 76,950 $64,000 Cost of goods sold 41,475 42,000 Gross margin 35,475 22,000 Selling and administrative expenses: Selling expenses 11,500 10,100 Administrative expenses 6,400 6,500 Total selling and administrative expenses 17,900 16,600 Net operating income 17,575 5,400 Interest expense 850 850 Net income before taxes 16,725 4,550 Income taxes 6,690 1,820 Net income 10,035 2,730 Dividends to common stockholders 280 525 Net income added to retained earnings 9,755 2, 205 Beginning retained earnings 33,545 31,340 Ending retained earnings $43,300 $33,545 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.) days 1. Accounts receivable turnover 2. Average collection period 3. Inventory turnover 4. Average sale period 5. Operating cycle 6. Total asset turnover 9.50 38.42 3.50 104.29 days days 1.08