Exercise 14-5 (Algo) Financial Ratios for Assessing Profitability [LO14-5] 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 900,000 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 $23. All of the company's sales are on account. 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 Weller Corporation Comparative Balance Sheet (dollars in thousands) 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 Weller Corporation (dollars in thousands) Sales Cost of goods sold Gross margin This Year Last Year $240 $ 510 15,400 10,250 10,200 8,600 1,900 2,300 27,740 21,660 7,000 20,200 27,200 $ 54,940 7,000 20,000 27,000 $ 48,660 $ 10,500 800 400 11,700 5,000 16,700 $ 8,800 1,200 400 10,400 5,000 15,400 900 900 4,700 4,780 5,600 32,640 38,240 5,600 27,660 33,260 $ 54,940 $ 48,660 Comparative Income Statement and Reconciliation This Year Last Year $ 84,000 53,000 31,000 Selling and administrative expenses: 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 data for this year: $ 89,000 57,000 32,800 9,500 9,000 13,000 12,000 22,500 21,000 9,500 10,000 688 600 8,900 9,400 3,560 3,760 5,340 5,640 360 720 4,988 27,660 4,920 22,748 $ 32,640 $ 27,660 1. Gross margin percentage. (Round your percentage answer to 1 decimal place (l.e., 0.1234 should be entered as 12.3).) 2. Net profit margin percentage. (Round your percentage answer to 1 decimal place (l.e., 0.1234 should be entered as 12.3).) 3. Return on total assets. (Round your percentage answer to 1 decimal place (l.e., 0.1234 should be entered as 12.3).) 4. Return on equity. (Round your percentage answer to 2 decimal places (l.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 56 56 % 56