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 $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 $24. 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 $ 1,140 $ 1,240 Accounts receivable, net 10,100 8,300 Inventory 13,500 11,800 Prepaid expenses 600 540 Total current assets 25,340 21,880 Property and equipment: Land 9,700 9,700 Buildings and equipment, net 46,438 37,904 Total property and equipment 56,138 47,604 Total assets $ 81,478 $ 69,484 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 18,700 $ 18,700 Accrued liabilities 950 860 Notes payable, short term 0 300 Total current liabilities 19,650 19,860 Long-term liabilities: Bonds payable 8,600 8,600 Total liabilities 28,250 28,460 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 47,228 35,024 Total stockholders' equity 53,228 41,024 Total liabilities and stockholders' equity $ 81,478 $ 69,484 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 75,000 $ 65,000 Cost of goods sold 36,000 40,000 Gross margin 39,000 25,000 Selling and administrative expenses: Selling expenses 10,800 10,500 Administrative expenses 6,600 6,500 Total selling and administrative expenses 17,400 17,000 Net operating income 21,600 8,000 Interest expense 860 860 Net income before taxes 20,740 7,140 Income taxes 8,296 2,856 Net income 12,444 4,284 Dividends to common stockholders 240 300 Net income added to retained earnings 12,204 3,984 Beginning retained earnings 35,024 31,040 Ending retained earnings $ 47,228 $ 35,024 Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier. (For all requirements, round your answers to 2 decimal places.)

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 $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 $24. 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 $ 1,140 $ 1,240 Accounts receivable, net 10,100 8,300 Inventory 13,500 11,800 Prepaid expenses 600 540 Total current assets 25,340 21,880 Property and equipment: Land 9,700 9,700 Buildings and equipment, net 46,438 37,904 Total property and equipment 56,138 47,604 Total assets $ 81,478 $ 69,484 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 18,700 $ 18,700 Accrued liabilities 950 860 Notes payable, short term 0 300 Total current liabilities 19,650 19,860 Long-term liabilities: Bonds payable 8,600 8,600 Total liabilities 28,250 28,460 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 47,228 35,024 Total stockholders' equity 53,228 41,024 Total liabilities and stockholders' equity $ 81,478 $ 69,484 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 75,000 $ 65,000 Cost of goods sold 36,000 40,000 Gross margin 39,000 25,000 Selling and administrative expenses: Selling expenses 10,800 10,500 Administrative expenses 6,600 6,500 Total selling and administrative expenses 17,400 17,000 Net operating income 21,600 8,000 Interest expense 860 860 Net income before taxes 20,740 7,140 Income taxes 8,296 2,856 Net income 12,444 4,284 Dividends to common stockholders 240 300 Net income added to retained earnings 12,204 3,984 Beginning retained earnings 35,024 31,040 Ending retained earnings $ 47,228 $ 35,024 Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier. (For all requirements, round your answers to 2 decimal places.)

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 21E

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Question

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year	Last Year
Assets
Current assets:
Cash	$	1,140	$	1,240
Accounts receivable, net		10,100		8,300
Inventory		13,500		11,800
Prepaid expenses		600		540
Total current assets		25,340		21,880
Property and equipment:
Land		9,700		9,700
Buildings and equipment, net		46,438		37,904
Total property and equipment		56,138		47,604
Total assets	$	81,478	$	69,484
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	18,700	$	18,700
Accrued liabilities		950		860
Notes payable, short term		0		300
Total current liabilities		19,650		19,860
Long-term liabilities:
Bonds payable		8,600		8,600
Total liabilities		28,250		28,460
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		47,228		35,024
Total stockholders' equity		53,228		41,024
Total liabilities and stockholders' equity	$	81,478	$	69,484

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$	75,000	$	65,000
Cost of goods sold		36,000		40,000
Gross margin		39,000		25,000
Selling and administrative expenses:
Selling expenses		10,800		10,500
Administrative expenses		6,600		6,500
Total selling and administrative expenses		17,400		17,000
Net operating income		21,600		8,000
Interest expense		860		860
Net income before taxes		20,740		7,140
Income taxes		8,296		2,856
Net income		12,444		4,284
Dividends to common stockholders		240		300
Net income added to retained earnings		12,204		3,984
Beginning retained earnings		35,024		31,040
Ending retained earnings	$	47,228	$	35,024

Required:

Compute the following financial ratios for this year:

1. Times interest earned ratio.

2. Debt-to-equity ratio.

3. Equity multiplier.

(For all requirements, round your answers to 2 decimal places.)

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