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 $.50. The market value of the company’s common stock at the end of the year was $27. 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 $.50. The market value of the company’s common stock at the end of the year was $27. All of the company’s sales are on account.

Explanation / Answer

1. Times interest earning ratio = EBIT / Interest Expenses

= 11700/990

= 11.8 times.

2. Debt to equity ratio = Total Liabilities / Shareholders' Equity

= 30040/46992

= 0.64 or 63.93 %

3. Equity multiplier = Total Assets / Total Shareholders' Equity

= 77032/46992

1.64

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