Exercise 16-5 (Algo) Financial Ratios for Assessing Profitability [LO16-5] 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 860,000 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 $21. All of the company's sales are on account Heller Corporation Comparative Balance Sheet (dollars in thousands) This Yeac Last Year 5 976 15,000 10,000 1,860 22,036 $ 1,920 10,050 8,440 2,220 22,630 es 6,600 10.000 26,400 354,236 6,600 19.600 26, 200 $43,830 Assets Current assets Cash Accounts receivable, net Tnventory Prepaid expenses Total current assets Property and equipment Land Boldings and equipment, net Total property and equipent Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilitiest Bonds payable Total liabilities Stockholders' equity: Connon stock Additional pald-in capital Total paid in capital Retained earnings Total stockholders! equity Total liabilities and stockholders' equity $10,100 720 360 11,150 $ 3,600 1,000 300 9.960 6,250 17.430 6,250 16,210 860 4.500 5,360 31,446 36,866 554,236 360 4,500 5,36e 27,260 32,620 548,830 TULAL SLULKIUuely Total liabilities and stockholders' equity 50,000 $54,236 34,020 $48,830 Last Year $80,000 51,eee 29.080 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Sales $85,000 Cost of goods sold 55,000 Gross margin 30.000 Selling and administrative expenses : Selling expenses 9,100 Adsinistrative expenses 12,600 Total selling and administrative expenses 21,700 Net operating income 8,300 Interest expense 750 Net Income before taxes 7,550 Income taxes 3,020 Net Income Dividends to common stockholders 4,530 344 Net Income added to retained earnings Beginning retained earnings 4,186 27,260 Ending retained earnings $31,446 8,600 11,609 20,200 8.800 750 8,050 3,220 4,830 688 4,142 23, 118 $27,260 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 (.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 (ie., 0.1234 should be entered os 12.34).) 1. Gross margin percentage 2 Net profit margin percentage 3. Return on total assets 4. Return on equity % %
