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 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 $22. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets $ 1,270 9,700 12,800 $ 1,400 7,400 11,400 650 540 Property and equipment: 24,420 20,740 Land 10,200 10,200 Buildings and equipment, net 50,451 41,420 Total property and equipment 60,651 51,620 Total assets $85,071 $72,360 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $19,500 $18,900 Accrued liabilities. 900 810 Notes payable, short term 270 270 Total current liabilities 20,670 19,980 Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital 8,500 8,500 29,170 28,450 600 600 4,000 4,000 Total paid-in capital 4,600 4,600 51,301 Retained earnings, 39,280 Total stockholders' equity 55,901 43,880 Total liabilities and stockholders' equity $85,071 $72,360 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Gross margin Sales Cost of goods sold Selling and administrative expenses: $79,515 $66,000 39,930 35,000 39,585 31,000 Selling expenses 11,000 10,000 Administrative expenses 7,300 6,000 Total selling and administrative expenses 18,300 16,000 Net operating income 21,285 15,000 Interest expense 850 850 Net income before taxes Income taxes Net income 20,435 8,174 12,261 14,150 5,660 8,490 Dividends to common stockholders 240 450 Net income added to retained earnings 12,021 8,040 Beginning retained earnings Ending retained earnings 39,280 $51,301 31,240 $39,280 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.) 1. Accounts receivable turnover i 2. Average collection period 3 Inventory turnover 4. Average sale period. 5. Operating cycle 6. Total asset turnover days days days