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 500,000 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 $ 1,190 10,700 12,900 $ 1,340 8,300 11,500 680 21,820 780 25,570 9,200 55,789 64,989 $90,559 9,200 38,943 48,143 $69,963 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 $19,400 1,030 130 20,560 $18,900 840 130 19,870 9, 200 29,760 9,200 29,070 500 4,000 4,500 56, 299 60,799 $ 90,559 500 4,000 4,500 36,393 40,893 $69,963 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $90,250 $65,000 Cost of goods sold 37,820 37,000 Gross margin 52,430 28,000 Selling and administrative expenses: Selling expenses 11,200 10,300 Administrative expenses 6,800 6,400 Total selling and administrative expenses 18,000 16,700 Net operating income 11,300 Interest est expense 920 920 220 Net income before taxes Income taxes Income taxe 13,404 1404 4,152 Net income 20,106 Dividends to common stockholders 200 375 Net income added to retained earnings 19,906 5,853 Beginning retained earnings 36,393 30,540 Ending retained earnings $56, 299 $36, 393 34,430 33,510 10,380 6,228 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 days days
