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 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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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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