Exercise 14-4 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 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 $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: $ 1,150 $ 1,380 Cash Accounts receivable, net Inventory 9,200 12,300 700 6,900 11,800 Prepaid expenses 560 20,640 23,350 Total current assets Property and equipment: 9,300 50,074 59,374 9,300 39,662 48,962 Land Buildings and equipment, net Total property and equipment $69,602 $82,724 Total assets Liabilities and Stockholders' Equity Current liabilities: $20,300 1,090 $19,100 Accounts payable Accrued liabilities 710 160 Notes payable, short term 21,390 Total current liabilities 19,970 Long-term liabilities: Bonds payable 9,300 30,690 9,300 29,270 Total liabilities Stockholders' equity: Common stock 2,000 2,000 Additional paid-in capital Total paid-in capital Retained earnings 4,000 6,000 34,332 4,000 6,000 46,034 Total stockholders' equity 52,034 40,332 $82,724 $69,602 Total liabilities and stockholders' equity Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year $71,000 $66,000 Sales 33,000 41,000 Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses 38,000 25,000 10,900 6,600 10,600 6,500 Total selling and administrative expenses 17,100 17,500 Net operating income Interest expense 7,500 930 20,900 930 Net income before taxes 6,570 2,628 19,970 7,988 Income taxes Net income 11,982 3,942 350 280 Dividends to common stockholders Net income added to retained earnings 11,702 34,332 3,592 30,740 Beginning retained earnings $46,034 $34,332 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 Equity multiplier 3