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.

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.

Explanation / Answer

Times Interest earned ratio = Earning before interest and taxes/interest expenses

=Net Income + taxes + Interest = Earning before interest and taxes=3,540+2,360+600 = 6500

= 6500/600 = 10.833 Times

2. Debt Equity Ratio = Total Liabilities / Total Equity

=15,400/34,880 =0.44

3. Equity Multiplier Ratio = Total Asset/ total Stockholder Equity

=50,280/34,880= 1.44

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