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 500,000 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 $21. All of the company’s sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash $ 1,170 $ 1,280 Accounts receivable, net 9,300 7,500 Inventory 12,100 12,300 Prepaid expenses 720 610 Total current assets 23,290 21,690 Property and equipment: Land 9,900 9,900 Buildings and equipment, net 41,043 35,739 Total property and equipment 50,943 45,639 Total assets $ 74,233 $ 67,329 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 18,700 $ 17,900 Accrued liabilities 900 740 Notes payable, short term 0 150 Total current liabilities 19,600 18,790 Long-term liabilities: Bonds payable 8,100 8,100 Total liabilities 27,700 26,890 Stockholders' equity: Common stock 2,000 2,000 Additional paid-in capital 4,000 4,000 Total paid-in capital 6,000 6,000 Retained earnings 40,533 34,439 Total stockholders' equity 46,533 40,439 Total liabilities and stockholders' equity $ 74,233 $ 67,329 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 67,000 $ 64,000 Cost of goods sold 38,000 40,000 Gross margin 29,000 24,000 Selling and administrative expenses: Selling expenses 10,900 10,800 Administrative expenses 6,800 6,100 Total selling and administrative expenses 17,700 16,900 Net operating income 11,300 7,100 Interest expense 810 810 Net income before taxes 10,490 6,290 Income taxes 4,196 2,516 Net income 6,294 3,774 Dividends to common stockholders 200 375 Net income added to retained earnings 6,094 3,399 Beginning retained earnings 34,439 31,040 Ending retained earnings $ 40,533 $ 34,439 Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier. 1. Times interest earned ratio 2. Debt-to-equity ratio 3. Equity multiplier
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 500,000 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 $21. All of the company’s sales are on account.
Weller Corporation Comparative (dollars in thousands) |
||||||
This Year | Last Year | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 1,170 | $ | 1,280 | ||
9,300 | 7,500 | |||||
Inventory | 12,100 | 12,300 | ||||
Prepaid expenses | 720 | 610 | ||||
Total current assets | 23,290 | 21,690 | ||||
Property and equipment: | ||||||
Land | 9,900 | 9,900 | ||||
Buildings and equipment, net | 41,043 | 35,739 | ||||
Total property and equipment | 50,943 | 45,639 | ||||
Total assets | $ | 74,233 | $ | 67,329 | ||
Liabilities and |
||||||
Current liabilities: | ||||||
Accounts payable | $ | 18,700 | $ | 17,900 | ||
Accrued liabilities | 900 | 740 | ||||
Notes payable, short term | 0 | 150 | ||||
Total current liabilities | 19,600 | 18,790 | ||||
Long-term liabilities: | ||||||
Bonds payable | 8,100 | 8,100 | ||||
Total liabilities | 27,700 | 26,890 | ||||
Stockholders' equity: | ||||||
Common stock | 2,000 | 2,000 | ||||
Additional paid-in capital | 4,000 | 4,000 | ||||
Total paid-in capital | 6,000 | 6,000 | ||||
40,533 | 34,439 | |||||
Total stockholders' equity | 46,533 | 40,439 | ||||
Total liabilities and stockholders' equity | $ | 74,233 | $ | 67,329 | ||
Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) |
||||||
This Year | Last Year | |||||
Sales | $ | 67,000 | $ | 64,000 | ||
Cost of goods sold | 38,000 | 40,000 | ||||
Gross margin | 29,000 | 24,000 | ||||
Selling and administrative expenses: | ||||||
Selling expenses | 10,900 | 10,800 | ||||
Administrative expenses | 6,800 | 6,100 | ||||
Total selling and administrative expenses | 17,700 | 16,900 | ||||
Net operating income | 11,300 | 7,100 | ||||
Interest expense | 810 | 810 | ||||
Net income before taxes | 10,490 | 6,290 | ||||
Income taxes | 4,196 | 2,516 | ||||
Net income | 6,294 | 3,774 | ||||
Dividends to common stockholders | 200 | 375 | ||||
Net income added to retained earnings | 6,094 | 3,399 | ||||
Beginning retained earnings | 34,439 | 31,040 | ||||
Ending retained earnings | $ | 40,533 | $ | 34,439 | ||
Required:
Compute the following financial ratios for this year:
1. Times interest earned ratio.
2. Debt-to-equity ratio.
3. Equity multiplier.
|
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images