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 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 company's common stock at the end of this year was $27. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1,250 10,600 12,300 770 24,920 $ 1,360 6,700 11,300 680 20, 040 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 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 10,200 47,796 57,996 $82,916 10, 200 42,368 52,568 $72,608 $18,300 $20,200 1,000 810 230 19,340 21,200 8,200 29,400 8,200 27,540 2.999 2.999 8,200 29,400 8,200 27,540 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 2,000 4,000 6,000 47,516 53,516 $82,916 2,000 4,000 6,000 39,068 45,068 $72,608 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $70,000 $64,000 Cost of goods sold 37,000 32,000 Gross margin 33,000 32,000 Selling and administrative expenses: Selling expenses 11,200 10, 200 Administrative expenses 6,500 6,100 Total selling and administrative expenses 17,700 16,300 Net operating income 15,300 15,700 Interest expense 820 820 Net income before taxes 14,480 14,880 Income taxes 5,792 5,952 Net income 8,688 8,928 Dividends to common stockholders 240 600 Net income added to retained earnings 8,448 8, 328 Beginning retained earnings 39,068 30,740 Ending retained earnings $47,516 $39,068 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.) 1. 2. Times interest earned ratio Debt-to-equity ratio Equity multiplier 3