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 $0.40 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 Current assets: $ 1.280 $ 1,560 12.300 9.100 9,700 8,200 1,800 2,100 Accounts receivable, net Prepaid expenses Total current assets 25,080 20,960 Property and equipment 6.000 6,000 Buildings and equipment, net Total property and equipment Total assets 19.200 19,000 25.200 25,000 $50.280 $45,960 Liabilities and Stockholders' Equity Current liabilities 9,500 8,300 Accounts payable Accrued liabilities Notes payable, short term 300 10.400 9,300 5.000 5,000 15,400 4,300 Total current liabilities Long-temm liabiities Bonds payable Total liabilities Common stock Addsional paid-in capital 800 4.200 800 4.200 5,000 Total paid-in capital Retained eamings 5,000 29.880 28,660 4,880 31,660 $50,280 $45,960 Total stockholders' equity Total liabilities and stockholders' equity Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) Sales Cost of goods sold This Year Last Year 79.000 $74,000 2,000 48,000 Gross margin 27,000 26,000

Explanation / Answer

1) Times interest earned ratio= Income before interest and taxes or EBIT/Interest expense

= 6500/600

= 10.83

2) Debt to eqity ratio= Total Liabilities/ Total Equity

= 15400/34880

= 0.44

3) Equity multiplier= Total Assets/ Shareholders equity

= 50280/34880

= 1.44

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