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 $24. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year 5 1,160 9,800 13,100 800 24,860 $ 1,280 8,400 11,380 540 21, 520 10,300 46,184 56,484 $81,344 10,388 37,254 47,554 $69, 074 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 $20,500 1,030 240 21,770 $18,500 740 240 19,480 8,600 30,370 8,600 28,080 700 4,000 4,700 46,274 50,974 $81,344 7ee 4,888 4,780 36,294 40,994 $69,074 Weller Corporation Comparative Income statement and Reconciliation (dollars in thousands) This Year Last Year Sales $78,260 $65,000 cost of goods sold 42,700 37,888 Gross margin 35,560 28,888 Selling and administrative expenses: Selling expenses 10,500 10,500 Administrative expenses 7,100 6,800 Total selling and administrative expenses 17,600 17,300 net onerating income 17 96A 19 700 Last Year $65,888 37,eee 28,888 weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Sales $78,260 cost of goods sold 42,700 Gross margin 35,560 Selling and administrative expenses: Selling expenses 10,500 Administrative expenses 7,100 Total selling and administrative expenses 17,600 Net operating income 17,960 Interest expense 860 Net income before taxes 17,100 Income taxes 6,840 Net income 10,260 Dividends to common stockholders 280 Net income added to retained earnings 9,980 Beginning retained earnings 36,294 Ending retained earnings $46, 274 10,5e2 6,888 17,380 10,700 86e 9,840 3,936 5,984 352 5,554 30,740 $36, 294 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.) 6.41 56.94 days 1. Accounts receivable turnover 2. Average collection period 3. Inventory tumover 4. Average sale period 5. Operating cycle 6. Total asset turnover days days
