Chapter 15 HW Comparative financial statements for Weller Carporation, a merchan

Question

Chapter 15 HW Comparative financial statements for Weller Carporation, a merchandising co December 31 appear below. The company did not issue any new common stock during the year A botal of 700,000 shares of common stock were outstanding The intorest rate on the face value, was 10% The icomte tax rate was 40% and the dvidend per share of cannon slok SDA this year The market value of the company 's common company's sales are on account cmpany, for the year ondng bonds, whith were sold at the stock at the end of the year was $28 All of the Weller Corporation Comparative Balance Sheet (dolars in thousands) This Yeat Last Year Assets Current assets Cash Accounts receivable, net Inveintory Prepaid experrses 3 1,180 1,270 9,8007,800 12600 10.900 60590 Total current assets Property and equipment 24,340 20.560 Buildings and squipment, net 10 800 10,800 52.267 37,882 otal propany and equpment Total assets 63,06748 682 587, 407 $69 242 Liabilities and Stockholders Equity Current iabisties Accounts payable Accrued liabliies Notes payable, short tamm 519 800 $18.000 700 170 910 170 Total current llabiltias Bonda payable Total lablitien Stockholdere' equty 20,880 18,950 B B00 B.800 29 60 27 750 O Type here to seardh

Explanation / Answer

1.

Receivable turnover ratio = Net credit sales /Average account receivable

                                            = $ 80,080/ [($ 9,800 + $ 7,800)/2]

                                            = $ 80,080/ ($ 17,600/2)

                                            = $ 80,080/ $ 8,800

                                            = 9.10 times

2.

Days to collect receivable = No. of days in a period/ Account receivable turnover ratio

= 365/ 9.1 = 40.11 days

3.

Inventory turnover = Cost of goods sold/Average inventory

                             = $ 34,075/ [($ 12,600 + $ 10,900)/2]

                             = $ 34,075/ ($ 23,500/2)

                             = $ 34,075/ $ 11,750 = 2.90 times

4.

Average sales period = Average account receivable/ Net sales x 365

                                 = [($ 9,800 + $ 7,800)/2]/$ 80,080 x 365

                                 = ($ 17,600/2)/80,080 x 365

                                = $ 8,800 /80,080 x 365 = 0.10989011 x 365 = 40.11 days

5.

Operating cycles = (365 /Inventory turnover) + (365/Account receivable turnover)

                          = (356/2.9) + (365/9.1)

                          = 125.862069 + 40.10989011 = 165.97 days              

6.

Total assets turnover = Net sales /Average total assets

                            = $ 80,080/ [($ 87,407 + $ 69,242)/2]

                            = $ 80,080/ ($156,649/2)

                           = $ 80,080/ $ 78,324.50

                           = 1.022413166 or 1.02

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