Exercise 16-2 (Algo) Financial Ratios for Assessing Liquidity [LO16-2]

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 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 last year and $0.40 this year. The market value of the companys common stock at the end of this year was $29. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year	Last Year
Assets
Current assets:
Cash	$ 1,170	$ 1,400
Accounts receivable, net	10,800	7,500
Inventory	12,500	10,700
Prepaid expenses	750	630
Total current assets	25,220	20,230
Property and equipment:
Land	9,400	9,400
Buildings and equipment, net	49,368	42,014
Total property and equipment	58,768	51,414
Total assets	$ 83,988	$ 71,644
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 19,400	$ 17,600
Accrued liabilities	1,040	870
Notes payable, short term	130	130
Total current liabilities	20,570	18,600
Long-term liabilities:
Bonds payable	8,600	8,600
Total liabilities	29,170	27,200
Stockholders' equity:
Common stock	600	600
Additional paid-in capital	4,000	4,000
Total paid-in capital	4,600	4,600
Retained earnings	50,218	39,844
Total stockholders' equity	54,818	44,444
Total liabilities and stockholders' equity	$ 83,988	$ 71,644

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$ 72,000	$ 65,000
Cost of goods sold	36,000	32,000
Gross margin	36,000	33,000
Selling and administrative expenses:
Selling expenses	10,700	10,300
Administrative expenses	6,400	6,600
Total selling and administrative expenses	17,100	16,900
Net operating income	18,900	16,100
Interest expense	860	860
Net income before taxes	18,040	15,240
Income taxes	7,216	6,096
Net income	10,824	9,144
Dividends to common stockholders	450	240
Net income added to retained earnings	10,374	8,904
Beginning retained earnings	39,844	30,940
Ending retained earnings	$ 50,218	$ 39,844

Required:

Compute the following financial data and ratios for this year:

1. Working capital. (Enter your answer in thousands.)

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

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