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 $26. 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
$ 1,130
$ 1,400
Accounts receivable, net
9,500
8,000
Inventory
12,200
11,000
Prepaid expenses
700
540
Total current assets
23,530
20,940
Property and equipment:
Land
9,300
9,300
Buildings and equipment, net
55,098
43,154
Total property and equipment
64,398
52,454
Total assets
$ 87,928
$ 73,394
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$ 19,600
$ 17,500
Accrued liabilities
1,070
770
Notes payable, short term
0
190
Total current liabilities
20,670
18,460
Long-term liabilities:
Bonds payable
9,600
9,600
Total liabilities
30,270
28,060
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
51,658
39,334
Total stockholders' equity
57,658
45,334
Total liabilities and stockholders' equity
$ 87,928
$ 73,394
Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year
Last Year
Sales
$ 74,000
$ 64,000
Cost of goods sold
34,000
32,000
Gross margin
40,000
32,000
Selling and administrative expenses:
Selling expenses
11,200
10,800
Administrative expenses
6,900
6,500
Total selling and administrative expenses
18,100
17,300
Net operating income
21,900
14,700
Interest expense
960
960
Net income before taxes
20,940
13,740
Income taxes
8,376
5,496
Net income
12,564
8,244
Dividends to common stockholders
240
450
Net income added to retained earnings
12,324
7,794
Beginning retained earnings
39,334
31,540
Ending retained earnings
$ 51,658
$ 39,334
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.)