Exercise 16-5 (Algo) Financial Ratios for Assessing Profitability (L016-5) 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 980,000 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 $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 This Year Last Year $ 4,568 16,200 10,600 1.980 33,348 $ 5,440 9,150 8.920 2,460 25,970 Weller Corporation Comparative Balance Sheet (dollars in thousands) Assets Current assets Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Duildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short tem Total current liabilities Long-term liabilities: Bonds payable Total liabilities stockholders' equity Common stock Additional paid-in capital Total paid-in capital Retained earning Total stockholders equity 7,800 21.000 28.800 $62,148 7,800 20.800 28,600 554,570 $11.300 960 480 12,740 $ 9,200 1.600 480 11,280 3.250 21,490 8.250 20.030 980 5,100 6,080 34.578 40,658 980 5.100 6.080 28,460 34.540 $62,148 $54,570 $11,300 960 480 12,740 $ 9,200 1,600 480 11,280 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 Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 8,750 21,490 8,750 20,030 980 5,100 6,080 34,578 40,658 $62,148 980 5, 100 6,080 28, 460 34,540 $54,570 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $97,000 $92,000 Cost of goods sold 61,000 57,000 Gross margin 36,000 35,000 Selling and administrative expenses: Selling expenses 10,300 9,800 Administrative expenses 13,800 12,800 Total selling and administrative expenses 24,100 22,600 Net operating income 11,900 12,400 Interest expense 1,050 1,050 Net income before taxes 10,850 11,350 Income taxes 4,340 4,540 Net income 6,510 6,810 Dividends to common stockholders 392 784 Net income added to retained earnings 6,118 6,026 Beginning retained earnings 28,460 22, 434 Ending retained earnings $34,578 $28,460 61,000 36,000 57,000 35,000 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 10,300 13,800 24,100 11,900 1,050 10,850 4,340 6,510 9,800 12,800 22,600 12,400 1,050 11,350 4,540 6,810 784 6,026 22,434 $28,460 392 6,118 28,460 $34,578 Required: Compute the following financial data for this year: 1. Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 2. Net profit margin percentage. (Round your percentage answer to 1 decimal place i.e., 0.1234 should be entered as 12.3).) 3. Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 4. Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) % 1. Gross margin percentage 2. Net profit margin percentage 3. Return on total assots 4. Return on equity % %