Comparative financial statements for Weller Corporation, a merchandising company

Question

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 700,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 10%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. The market value of the company’s common stock at the end of the year was $23. All of the company’s sales are on account.

Accounts receivable turnover. (Assume that all sales are on account.) (Round your answer to 2 decimal places.)

Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)

Inventory turnover. (Round your answer to 2 decimal places.)

PART4.

Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)

Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.)

Total asset turnover. (Round your answer to 2 decimal places.)

Weller Corporation
Comparative Balance Sheet
(dollars in thousands) This Year Last Year   Assets   Current assets:      Cash $ 1,190 $ 1,230      Accounts receivable, net 9,400 7,900      Inventory 12,700 11,700      Prepaid expenses 680 700   Total current assets 23,970 21,530   Property and equipment:      Land 9,600 9,600      Buildings and equipment, net 54,064 39,061   Total property and equipment 63,664 48,661   Total assets $ 87,634 $ 70,191   Liabilities and Stockholders' Equity   Current liabilities:      Accounts payable $ 20,000 $ 17,600      Accrued liabilities 920 870      Notes payable, short term 210 210   Total current liabilities 21,130 18,680   Long-term liabilities:      Bonds payable 9,900 9,900   Total liabilities 31,030 28,580   Stockholders' equity:      Common stock 700 700      Additional paid-in capital 4,000 4,000        Total paid-in capital 4,700 4,700        Retained earnings 51,904 36,911   Total stockholders' equity 56,604 41,611   Total liabilities and stockholders' equity $ 87,634 $ 70,191

Explanation / Answer

1 Accounts receivable turnover = net credit sales /Average accounts receivable Net sales 80445 Beginning accounts receivable 7900 Ending accounts receivable 9400 Average accounts receivable 8650 Accounts receivable turnover 9.3 2 Days sales outstanding = 365 / accounts receivable tunover Days sales outstanding 39.2 Days 3 Inventory turnover = Cost of goods sold / Average inventory Cost of goods sold 36600 Beginning inventory 11700 Ending inventory 12700 Average inventory 12200 Average inventory = (Beginning + Ending )/2 Inventory turnover 3.0 4 Days sale in inventory = 365 / inventory turnover Days sales in inventory 121.7 Days 5 Operating cycle = days sales in inventory + average collection period Operating cycle 160.9 Days 6 Assets turnover ratio = Net sales / average total assets Net sales 80445 Beginning total assets 70191 Ending total assets 87634 Average total assets 78912.5 Assets turnover ratio 1.02

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