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

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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

 

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