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 810,000 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 so 40 this year. The market value of the company's common stock at the end of this year was $18. All of the company's sales are on account This Year Last Year $ 2,546 12,400 9.750 1,610 26,506 $ 2,770 9,150 8,240 2,120 22,280 6,100 19,300 25,400 $ 51,906 6,100 19.100 25, 200 $ 47,480 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 equipuent Total assets Liabilities and Stockholders' Equity Current Ilabilities 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 $ 9,600 620 310 10,530 $ 3,350 750 310 9,410 6,250 16250 6,250 15,666 810 4,250 5,060 30.066 35, 126 $ 51,906 610 4,250 5,060 26,760 31,820 $ 47,480 Last Year $ 75,000 48,500 26.50 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Sales $ 80,000 Cost of goods sold 52,500 Gross margin 27,500 Selling and administrative expenses : Selling expenses 8,600 Administrative expenses 12,100 Total selling and administrative expenses 20,700 Net operating income Interest expense 750 Net Income before taxes 6,050 Income taxes 2,420 Net Income 3.6.30 Dividends to conmon stockholders 324 Net income added to retained earnings 3.306 Beginning retained earnings 26,760 Ending retained earnings $ 30,006 6,800 8,100 11, 100 19,200 7,300 750 6,550 2,620 3,930 648 3,282 23,478 $ 26,760 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 os 12.3).) 2. Net profit margin percentage (Round your percentage answer to 1 decimal place (ie., 0.1234 should be entered as 12.3).) 3. Return on total assets. (Round your percentage answer to 1 decimal place (.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).) 1. Gross margin percentage 2 Net profit margin percentage 3. Return on total assets 4. Return on equity % 9 % %
