Exercise 14-3 Financial Ratios for Asset Management (L014-3) 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 700,000 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 the year was $25. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1,150 9,400 13,400 720 24,670 $ 1,280 6,700 11,900 500 20,380 10,000 40,964 50,964 $75,634 10,000 39,060 49,060 $69, 440 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 Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $19,900 1,020 290 21,210 $18,500 710 290 19,500 8,500 29,710 8,500 28,000 700 4,000 4,700 41,224 45,924 $ 75, 634 700 4,000 4,700 36, 740 41,440 $69,440 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $74,060 Cost of goods sold $65,000 48,070 36,000 Gross margin 25,990 29,000 Selling and adininistrative expenses Selling expenses Administrative expenses 10,800 10,900 6,400 6,500 Total selling and administrative expenses 17,200 17.400 Net operating income 8,790 11,600 Interest expense 850 850 Net income before taxes 7,940 109750 Income taxes 3,176 1,300 Net income 4,764 6,450 Dividends to common stockholders 280 350 Net income added to retained earnings 4,484 6.100 Beginning retained earnings 36,740 30,640 Ending retained earnings $41,224 $36,740 Required: Compute the following financial data for this year: 1. Accounts receivable turnover. (Assume that all sales are on account.) (Round your answer to 2 decimal places.) 2. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) 3. Inventory turnover. (Round your answer to 2 decimal places.) 4. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) 5. Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.) 6. Total asset turnover. (Round your answer to 2 decimal places.)
