Exercise 14-5 (Algo) Financial Ratios for Assessing Profitability (L014-5) 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 860,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, 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 $21. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollara in thousande) This Year Last Year $ 976 15,000 10,000 1,860 27,836 $ 1,920 10,050 8,440 2,220 22,630 6,600 19,800 26,400 $ 54,236 6,600 19,600 26,200 $ 48,830 Assets Current assetni 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 Mccrued liabilities Notes payable, short term Total current liabilities Long-term liabilities Bonds payable Total liabilities Stockholders' equity Connon stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 10,100 720 360 11,180 $ 8,600 1,000 360 9,960 6,250 17,430 6,250 16,210 860 4,500 5,360 31,146 36,806 $ 54,236 860 4.500 5,360 27,260 32,620 $ 48,830 Last Year $ 80,000 51,000 29,000 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousande) This Year Sales $ 85,000 Coat of goods sold 55,000 Cross margin 30,000 Selling and administrative expensee: Selling expenses 9,100 Administrative expenses 12,600 Total selling and administrative expenses 21,700 Net operating income 8,300 Interest expense 750 Net income before taxes 7,550 Income taxea 3,020 Net income 4,530 Dividends to common stockholders 344 Net income added to retained earnings 4,186 Beginning retained earnings 27,260 Ending retained carnings $ 31,446 8,600 11,600 20,200 8,800 750 8,050 3,220 4,830 688 4,142 23,118 $ 27,260 Required: Compute the following financial data for this year: 1. Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 2. Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 3. Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 4. Return on equity. (Round your percentage answer to 2 decimal places (.e., 0.1234 should be entered as 12.34).) 1. Gross margin percentage 2. Net profit margin percentage 3. Return on total assets 4 Return on equity %
