EXERCISE 15-2 Financial Ratios for Assessing Liquidity (L015-2 Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock dur- ing the year. A total of 800.000 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 50.40. The market value of the company's common stock at the end of the year was $18. 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 .... Buildings and equipment, net ...... Total property and equipment .... Total assets ........ $ 1,280 12,300 9,700 1,800 25.080 $ 1,560 9,100 8,200 2.100 20.960 6,000 19.200 25,200 $50,280 6,000 19.000 25,000 $45,960 $ 9,500 600 $ 8,300 700 300 9,300 300 10,400 5,000 5,000 14,300 15,400 Liabilities and Stockholders' Equity Current liabilities: 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 .......... 800 4,200 5,000 29,880 34,880 $50,280 800 4,200 5,000 26,660 31,660 $45,960 le 1 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year $79,000 52,000 27,000 $74,000 48,000 26,000 Sales ....... Cost of goods sold ...... Gross margin ............ 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 ........ 8,500 12,000 20,500 6,500 600 5,900 2,360 3,540 320 3,220 26,660 $29,880 8,000 11,000 19,000 7,000 600 6,400 2,560 3,840 320 3,240 23,420 $26,660 riad EXERCISE 15-4 Financial Ratios for Debt Management [LO15-4] Refer to the data in Exercise 15-2 for Weller Corporation. Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier