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 $21. All of the company’s sales are on account.

1. Accounts receivable turnover

2. Avg. Collection Period

3. Inventory turnover

4. average sale period

5. Operating cycle

6. total asset turnover

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 $21. All of the company’s sales are on account.

Explanation / Answer

Solution:

1. Accounts receivable turnover = Sales / Average Accounts receivable

= 77,350 / 8,500

= 9.1 Times

2. Average collection period = (Average Accounts receivable / Sales) x 365

= (8,500 / 77,350) x 365

= 40 Days

3. Inventory turnover = sales / Average Inventory

= 77,350 / 12,300

= 6.29 Times

4. average sale period = 365 / Inventory turnover

= 365 /6.29

= 58 Days

5. Operating cycle =  average sale period + Average collection period

= 40 + 58

= 98 Days

6. total asset turnover = sales / Average assets

= 77,350 / 79,496

= 0.97 Times

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.