Exercise 15-2 Financial Ratios for Assessing Liquidity [LO15-2]

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 during the year. A total of 600,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $0.75. The market value of the companys common stock at the end of the year was $20. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year			Last Year
Assets
Current assets:
Cash	$	1,270		$	1,320
Accounts receivable, net		10,600			6,900
Inventory		13,500			11,800
Prepaid expenses		700			600
Total current assets		26,070			20,620
Property and equipment:
Land		10,800			10,800
Buildings and equipment, net		47,044			39,122
Total property and equipment		57,844			49,922
Total assets	$	83,914		$	70,542
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	19,100		$	18,300
Accrued liabilities		910			740
Notes payable, short term		260			260
Total current liabilities		20,270			19,300
Long-term liabilities:
Bonds payable		8,800			8,800
Total liabilities		29,070			28,100
Stockholders' equity:
Common stock		600			600
Additional paid-in capital		4,000			4,000
Total paid-in capital		4,600			4,600
Retained earnings		50,244			37,842
Total stockholders' equity		54,844			42,442
Total liabilities and stockholders' equity	$	83,914		$	70,542

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	74,000		$	65,000
Cost of goods sold		34,000			35,000
Gross margin		40,000			30,000
Selling and administrative expenses:
Selling expenses		11,200			10,200
Administrative expenses		6,500			6,000
Total selling and administrative expenses		17,700			16,200
Net operating income		22,300			13,800
Interest expense		880			880
Net income before taxes		21,420			12,920
Income taxes		8,568			5,168
Net income		12,852			7,752
Dividends to common stockholders		450			450
Net income added to retained earnings		12,402			7,302
Beginning retained earnings		37,842			30,540
Ending retained earnings	$	50,244		$	37,842

Required:

Compute the following financial data and ratios for this year:

1.	Working capital.

2.	Current ratio. (Round your answer to 2 decimal places.)

3.	Acid-test ratio. (Round your answer to 2 decimal places.)