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 910,000 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 $24. All of the company's sales are on account. This Year Last Year $ 1,506 15,500 10,250 1,910 29,166 $ 1,720 10,300 8,640 2,320 22,980 Weller Corporation Comparative Balance Sheet (dollars in thousands) 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 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 7,100 20,300 27,400 $ 56,566 7,100 20, 100 27,200 $ 50, 180 $ 10,600 820 410 11,830 $ 8,850 1,250 410 10,510 6,250 18,080 6,250 16,760 11,830 10,510 6,250 18,080 6,250 16,760 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 910 4,750 5,660 32,826 38, 486 $ 56,566 910 4,750 5,660 27,760 33, 420 $ 50,180 Last Year $ 85,000 53,500 31,500 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Sales $ 90,000 Cost of goods sold 57,500 Gross margin 32,500 Selling and administrative expenses : Selling expenses 9,600 Administrative expenses 13, 100 Total selling and administrative expenses 22,700 Net operating income 9,800 Interest expense 750 Net income before taxes 9,050 Income taxes 3,620 Net income 5,430 Dividends to common stockholders 364 Net income added to retained earnings 5,066 Beginning retained earnings 27,760 Ending retained earnings $ 32,826 9,100 12,100 21,200 10,300 750 9,550 3,820 5,730 728 5,002 22,758 $ 27,760 Required: CARA the fallen innal for the in 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 22,700 9,800 750 9,050 3,620 5,430 364 5,066 27.760 $ 32, 826 21,200 10,300 750 9,550 3,820 5,730 728 5,002 22,758 $ 27,760 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 (i.e., 0.1234 should be entered as 12.34).) Answer is complete but not entirely correct. 1. Gross margin percentago 2. Net profit margin percentage 3. Return on total assets 4. Return on equity 36.1 % 6.0% 9.6 % 14.10 %
