Comparative financial statements for Weller Corporation, a merchandising company

Question

Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and S0.40 this year. The market value of the company's common stock at the end of the year was $18. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: S 1,280 S 1,560 2,300 9,100 9,700 8.200 1,800 2,100 Cash Accounts receivable, net Prepaid expenses Total current assets 25,080 20,960 Property and equipment: Land 6,000 6,000 Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity 9,200 19,000 25,200 25,000 $50,280 $45,960 Current liabilities Accounts payable Accrued liabilities Notes payable, short term S9,500 8,300 700 300 600 300 Total current liabilities Long-term liabilities: 10.400 9,300 5,000 5,000 5,400 14,300 Bonds payable Total liabilities Common stock Additional paid-in capital 800 800 4,200 4,200 5,000 Total paid-in capital Retained earnings 5,000 29880 26.660 34,880 31,660 S50,280 $45.960 Total stockholders' equity Total liabilities and stockholders' equity

Explanation / Answer

1. Gross Margin Percentage = 27000 * 100 / 79000 = 34.18%

2. Net Profit Margin Percentage = 3540 * 100 / 79000 = 4.48%

3. Return on total assets = 3540 / 50280 = 0.0704 or 7.04%

4. Return on equity = Income to equity / Opening balance of equity = 3540 / 31660 = 0.1118 or 11.18%

Opening balance of equity = $31660

Income attributable to equity = $3540

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