Exercise 16-4 (Algo) Financial Ratios for Debt Management (L016-4) 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 500,000 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 company's common stock at the end of this year was $23. All of the company's sales are on account Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1,140 9,800 13,700 680 25,320 $ 1,220 7.900 11.100 610 20.830 9.100 39,819 48,919 $74,239 9, 100 38.347 47.447 $68,277 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 asset 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 cornings Total stockholders' equity Total llit for it $18,800 950 0 19,750 $13, 100 740 250 19,090 3.300 28,050 8,300 27390 2.000 4.000 6,000 40.189 46189 574 910 2.000 4.000 6,000 34.887 40.887 6 ht $18,800 950 0 19,750 $18, 100 740 250 19,090 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 8,300 28,050 8,300 27,390 2,000 4,000 6,000 40, 189 46, 189 $74,239 2,000 4,000 6,000 34,887 40,887 $68,277 ces Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $67,000 $66,000 Cost of goods sold 39,000 42,000 Gross margin 28,000 24,000 Selling and administrative expenses: Selling expenses 11,100 10,100 Administrative expenses 6,900 6,200 Total selling and administrative expenses 18,000 16,300 Net operating income 10,000 7,700 Interest expense 830 830 Net income before taxes 9,170 6,870 Income taxes 3,668 2,748 Net income 5,502 4.122 Dividends to common stockholders 200 375 Net income added to retained earnings 5,302 3,747 Beginning retained earnings 34,887 31,140 Ending retained earnings $40, 189 $34,887 Required: Committo the fallawna financial rating for the war AU $ 67,000 39,000 28,000 $66,000 42,000 24,000 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 11,100 6,900 18,000 10,000 830 9,170 3,668 5,502 200 5,302 34,887 $40,189 10,100 6,200 16,300 7,700 830 6,870 2,748 4,122 375 3, 747 31,140 $34,887 ces Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier. (For all requirements, round your answers to 2 decimal places.) Times interest earned ratio Debt-to-equity ratio Equity multiplier