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 500,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $1.00 last year and $0.65 this year. The market value of the company’s common stock at the end of the year was $29. 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 500,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $1.00 last year and $0.65 this year. The market value of the company’s common stock at the end of the year was $29. All of the company’s sales are on account.

Explanation / Answer

current asset = 24780

Current liabilities = 20920

1)Working capital =current asset -current liabilities

                             = 24780-20920

                            = $ 3860

2)current ratio =current asset/ current liabilities

                              = 24780/20920

                          = 1.18 : 1

3)Acid test ratio = (current asset - Inventory -Prepaid expense)/current liabilities

                          = (24780-12900-620)/ 20920

                        = 11260 / 20920

                        = .54:1

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