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 950,000 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 $25.50. All of the company’s sales are on account.

Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

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 950,000 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 $25.50. All of the company’s sales are on account.

Explanation / Answer

1) Gross margin percentage

= Gross profit / net sales for the year

= $34500000/ $94000000

= 36.7%

2) Net profit margin

= Net margin / Net sales

= $ 6240000 /$ 94000000

= 6.6%

3) Return on total assets

= Net Income / Average total assets

= $6240000 / $53640000

=11.6%

Note: Average total assets = ($57270000 + $50010000) / 2 = $53640000

4) Return on equity

= (Net profit - preference dividend) / Average Shareholders' equity

Note: shareholders equity does not contain preference share capital

Return on equity for the company

= ($6240000 - $0) / $36990000

= 16.9%

Avereage shareholder's equity = (39920000+34060000) / 2 = $36990000

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.