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Exercise 14-5 Financial Ratios for Assessing Profitability [LO14-5] Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below.

Exercise 14-5 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 890,000 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 companys common stock at the end of the year was $22. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
This Year Last Year
Assets
Current assets:
Cash $ 4,774 $ 5,550
Accounts receivable, net 15,300 10,200
Inventory 10,150 8,560
Prepaid expenses 1,890 2,280
Total current assets 32,114 26,590
Property and equipment:
Land 6,900 6,900
Buildings and equipment, net 20,100 19,900
Total property and equipment 27,000 26,800
Total assets $ 59,114 $ 53,390
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 10,400 $ 8,750
Accrued liabilities 780 1,150
Notes payable, short term 390 390
Total current liabilities 11,570 10,290
Long-term liabilities:
Bonds payable 10,000 10,000
Total liabilities 21,570 20,290
Stockholders' equity:
Common stock 890 890
Additional paid-in capital 4,650 4,650
Total paid-in capital 5,540 5,540
Retained earnings 32,004 27,560
Total stockholders' equity 37,544 33,100
Total liabilities and stockholders' equity $ 59,114 $ 53,390

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
This Year Last Year
Sales $ 88,000 $ 83,000
Cost of goods sold 56,500 52,500
Gross margin 31,500 30,500
Selling and administrative expenses:
Selling expenses 9,400 8,900
Administrative expenses 12,900 11,900
Total selling and administrative expenses 22,300 20,800
Net operating income 9,200 9,700
Interest expense 1,200 1,200
Net income before taxes 8,000 8,500
Income taxes 3,200 3,400
Net income 4,800 5,100
Dividends to common stockholders 356 712
Net income added to retained earnings 4,444 4,388
Beginning retained earnings 27,560 23,172
Ending retained earnings $ 32,004 $ 27,560

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).)

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