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 920,000 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 $0.40. The market value of the company’s common stock at the end of the year was $24.00. All of the company’s sales are on account.

Compute the following financial data for this year:

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 920,000 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 $0.40. The market value of the company’s common stock at the end of the year was $24.00. All of the company’s sales are on account.

Explanation / Answer

Solution:

1. Gross Margin = Gross Profit / Sales * 100 Gross Profit 33,000 Sales 91,000 Gross Margin Percentage 36.3% 2. Net profit margin percentage = Net Profit /Sales * 100 Net profit 5,520 Sales 91,000 Net profit margin percentage 6.1% 3. Return on Total assets = Net income / Average total assets Net profit 5520 Beginning Assets 51700 Ending Assets 58,192 Average assets = ( Beginning assets + ending assets / 2 ) 54946 Return on total assets 10.0% 4.Return on Equity = Net income / Shareholder's Equity Net profit 5520 Shareholder's equity 38,732 Return on Equity 14.25%

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