Exercise 14-4 (Algo) Financial Ratios for Debt Management [LO14-4] 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 this year was $29. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) 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 This Year Last Year $ 1,128 10,300 $1,400 13,800 8,200 12,400 678 640 25,890 22,640 9,908 9,900 46,114 41,272 56,014 51,172 $ 81,984 $ 73,812 $ 18,900 998 $ 17,500 830 200 19,898 18,530 9,800 9,800 29,690 28,330 2,000 2,000 4,000 4,800 6,000 6,000 46,214 39,482 $2,214 45,482 $ 81,984 $ 73,812 Total stockholders' equity Total liabilities and stockholders' equity Weller Corporation (dollars in thousands) Sales Cost of goods sold Gross margin Selling and administrative expenses: Comparative Income Statement and Reconciliation This Year $ 71,000 41,000 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 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. Times interest earned ratio 2. Debt-to-equity ratio 3. Equity multiplier Last Year $ 65,000 33,000 30,000 32,000 10,900 10,200 6,500 6,000 17,400 16,200 12,600 15,800 980 11,620 4,648 988 14,820 5,928 6,972 240 8,892 450 8,442 31,040 6,732 39,482 $ 46,214 $ 39,482