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 $0.50. The market value of the company’s common stock at the end of the year was $25. 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 $0.50. The market value of the company’s common stock at the end of the year was $25. All of the company’s sales are on account.

Explanation / Answer

1) Working Capital = Current Asset - Current Liabilities                                    = 20410 - 21460                                    = -1050 2) Current Ratio Total Current Assets = 20410 Total Current Liabilities = 21460 Current Ratio = 20410 / 21460 = 0.95 : 1 3) Acid Test ratio = (Total Current Assets - Inventory - Prepaid Expenses)/ Current liabilities                                = ( 20410 - 12800 - 770 ) / 21460                                 = 6840 / 21460                                 = 0.32 : 1

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