5 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 850,000 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 $20. All of the company's sales are on account. Assets Current assets: Cash Weller Corporation Comparative Balance Sheet (dollars in thousands) 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 Sales 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 Required: Compute the following financial data for this year: This Year Last Year Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) $ 1,810 12,800 9,950 1,850 26,410 1. Gross margin percentage 2. Net profit margin percentage 3. Return on total assets 4. Return on equity 6,500 19,700 26,200 % % % % 6,500 19,500 26,000 $ 52,610 $ 47,310 $ 10,000 700 350 11,050 5,000 16,050 $ 710 10,000 8,400 2,200 21,310 850 850 4,450 4,450 5,300 5,300 31,260 27,160 36,560 32,460 $ 52,610 $ 47,310 9,000 12,500 21,500 8,000 600 $ 8,550 950 350 9,850 7,400 2,960 4,440 340 5,000 14,850 This Year Last Year $ 84,000 $79,000 54,500 50,500 29,500 28,500 8,500 11,500 20,000 8,500 600 7,900 3,160 4,740 680 4,100 27,160 $ 31,260 $ 27,160 4,060 23,100 1. Gross margin percentage. Note: Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3). 2. Net profit margin percentage. Note: Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3). 3. Return on total assets. Note: Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3). 4. Return on equity. Note: Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).