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 960,000 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 $26. All of the company's sales are on account. Assets Current assets: Cash Weller Corporation Comparative Balance Sheet (dollars in thousands) Accounts receivable, net Inventory Prepaid expenses Total current assets This YearLast Year $ $ 2,036 3,020 16,000 9,050 10,500 8,848 1,960 2,420 38,496 23,330 Property and equipment: Land 7,600 7,600 Buildings and equipment, net 20,800 20,600 Total property and equipment 28,400 28,200 Total assets $ 58,896 51,530 Liabilities and Stockholders' Equity Current liabilities: Accounts payable 11,100 9,100 Accrued liabilities 920 1,500 Notes payable, short term 460 460 Total current liabilities 12,480 11,060 Long-term liabilities: Bonds payable Total Liabilities 6,250 6,250 18,730 17,310 Stockholders' equity: Common stock 960 960 Additional paid-in capital 5,000 5,000 Total paid-in capital 5,960 5,968 Retained earnings 34,206 28,260 Total stockholders' equity 40,166 34,220 Total Liabilities and stockholders' equity $ 58,896 51,530 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 95,000 $ 90,000 Cost of goods sold 60,000 56,000 Gross margin 35,000 34,000 Selling and administrative expenses: Selling expenses 10,100 9,600 Administrative expenses 13,600 12,600 Total selling and administrative expenses 23,700 22,200 Net operating incone 11,300 11,000 Interest expense 750 750 Net income before taxes: 10,550 11,050 Income taxes 4,220 4,420 Net income 6,330 6,630 Dividends to common stockholders 384 768 Net income added to retained earnings Beginning retained earnings Ending retained earnings $34,206 5,946 28,268 $28,260 5,862 22,398 Required: Compute the following financial data for this year: 1. Gross margin percentage. (Round your percentage answer to 1 decimal place (ie., 0.1234 should be entered as 12.3)) 2. Net profit margin percentage. (Round your percentage answer to 1 decimal place (ie., 0.1234 should be entered as 12.31 3. Return on total assets. (Round your percentage answer to 1 decimal place (ie., 0.1234 should be entered as 12.3.) 4. Return on equity. (Round your percentage answer to 2 decimal places (ie. 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