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 1,000,000 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 $28. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands). This Year Last Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land $ 1,300 $1,610 16,400 9,250 10,700 9,000 2,000 2,500 30,400 22,360 8,000 8,000 Buildings and equipment, net 21,200 21,000 Total property and equipment 29,200 29,000 Total assets $ 59,600 $51,360 Liabilities and Stockholders' Equity Current liabilities: Accounts payable. Accrued 11abilities Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders equity: Common stock Additional paid-in capital Total paid-in capital Notes payable, short term $ 11,500 1,000 500 $ 9,300 1,700 500 13,000 11,500 5,000 5,000 18,000 16,500 1,000) 1,000 5,200 5,200 6,200 6,200 Retained earnings 35,400 28,660 Total stockholders' equity 41,600 34,860 Total liabilities and stockholders equity $ 59,600 $51,360 Total liabilities Stockholders' equity: Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Sales Cost of goods sold Gross margin Weller Corporation 18,000 16,500 1,000 1,000 5,200 5,200 6,200 6,200 35,400 28,660 41,600 34,860 $ 59,600 $51,360 Comparative Income Statement and Reconciliation (dollars in thousands) 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. This Year Last Year $ 99,000 $ 94,000 62,000 58,000 37,000 36,000 10,500 10,000 14,000 13,000 24,500 23,000 12,500 13,000 600 600 11,900 4,760 12,400 4,968 7,140 7,440 400 800 6,740 28,660 6,640 22,020 $ 35,400 $ 28,660 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 (1.e., 0.1234 should be entered as 12.34).) 1. Gross margin percentage 2. Net profit margin percentage 3. Return on total assets 56 % % 4. Return on equity 96