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 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 $075 last year and $0.40 this year. The market value of the company's common stock at the end of the year was $30. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Yea $ 1,110 10,100 13,200 650 25,060 $ 1,280 7,600 11,800 620 21,300 10,200 42,149 52,349 $77,409 10, 200 37,432 47,632 $68,932 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 $19,500 1,100 240 20,840 $18,000 840 240 19,080 8,300 29, 140 8,300 27,380 600 4,000 4,600 43, 669 48, 269 $77,409 600 4,000 4,600 36,952 41,552 $68,932 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 75,225 $64,000 Cost of goods sold 45,000 35,000 Gross margin 30,225 29,000 Selling and administrative expenses : Selling expenses 11,300 10,600 Administrative expenses 6,500 6,800 Total selling and administrative expenses 17,800 17,400 Net operating income 12,425 11,600 Interest expense 830 830 Net income before taxes 11,595 10,770 Income taxes 4,638 4,308 Net income 6,957 6,462 Dividends to common stockholders 240 450 Net income added to retained earnings 6, 717 6,012 Beginning retained earnings 36,952 30,940 Ending retained earnings $43,669 $36,952 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.) days 1 Accounts receivable turnover 2. Average collection period 3. Inventory turnover 4. Average sale period 5. Operating cycle 6. Total asset tumover days days
