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 this year was $21. All of the company’s sales are on account. Weller CorporationComparative Balance Sheet(dollars in thousands) This YearLast YearAssets Current assets: Cash$1,210 $1,220 Accounts receivable, net 10,800 8,000 Inventory 12,400 11,000 Prepaid expenses 680 630 Total current assets 25,090 20,850 Property and equipment: Land 9,300 9,300 Buildings and equipment, net 44,666 40,298 Total property and equipment 53,966 49,598 Total assets$79,056 $70,448 Liabilities and Stockholders' Equity Current liabilities: Accounts payable$18,800 $17,700 Accrued liabilities 960 780 Notes payable, short term 0 250 Total current liabilities 19,760 18,730 Long-term liabilities: Bonds payable 8,700 8,700 Total liabilities 28,460 27,430 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 44,596 37,018 Total stockholders' equity 50,596 43,018 Total liabilities and stockholders' equity$79,056 $70,448 Weller CorporationComparative Income Statement and Reconciliation(dollars in thousands) This YearLast YearSales$71,000 $65,000 Cost of goods sold 40,000 36,000 Gross margin 31,000 29,000 Selling and administrative expenses: Selling expenses 10,700 11,000 Administrative expenses 6,400 6,500 Total selling and administrative expenses 17,100 17,500 Net operating income 13,900 11,500 Interest expense 870 870 Net income before taxes 13,030 10,630 Income taxes 5,212 4,252 Net income 7,818 6,378 Dividends to common stockholders 240 300 Net income added to retained earnings 7,578 6,078 Beginning retained earnings 37,018 30,940 Ending retained earnings$44,596 $37,018 Required:Compute the following financial ratios for this year: 1. Times interest earned ratio.2. Debt-to-equity ratio.3. Equity multiplier.

In finance we use several financial ratios. These ratios helps us to determine the financial health…

Answered: Compute the following financial ratios…

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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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 this 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	$	1,210	$	1,220
Accounts receivable, net		10,800		8,000
Inventory		12,400		11,000
Prepaid expenses		680		630
Total current assets		25,090		20,850
Property and equipment:
Land		9,300		9,300
Buildings and equipment, net		44,666		40,298
Total property and equipment		53,966		49,598
Total assets	$	79,056	$	70,448
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	18,800	$	17,700
Accrued liabilities		960		780
Notes payable, short term		0		250
Total current liabilities		19,760		18,730
Long-term liabilities:
Bonds payable		8,700		8,700
Total liabilities		28,460		27,430
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		44,596		37,018
Total stockholders' equity		50,596		43,018
Total liabilities and stockholders' equity	$	79,056	$	70,448

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$	71,000	$	65,000
Cost of goods sold		40,000		36,000
Gross margin		31,000		29,000
Selling and administrative expenses:
Selling expenses		10,700		11,000
Administrative expenses		6,400		6,500
Total selling and administrative expenses		17,100		17,500
Net operating income		13,900		11,500
Interest expense		870		870
Net income before taxes		13,030		10,630
Income taxes		5,212		4,252
Net income		7,818		6,378
Dividends to common stockholders		240		300
Net income added to retained earnings		7,578		6,078
Beginning retained earnings		37,018		30,940
Ending retained earnings	$	44,596	$	37,018

Required:

Compute the following financial ratios for this year:

1. Times interest earned ratio.

2. Debt-to-equity ratio.

3. Equity multiplier.

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