I don\'t understand any of this. Comparative financial statements for Weller Cor
ID: 2531716 • Letter: I
Question
I don't understand any of this.
Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 600,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 10%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. 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 year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 600,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 10%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. 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. Times Interest earned Ratio = Income befor interest and taxes/Interest expense
= 11,500/890 = 12.92
2. Debt-to-Equity Ratio = Total Liabilities/shareholders' Equity
= 29,730/52,352 = .57
3. Equity Multiplier = Total Assets/Stockholder Equity
= 82,082/52,352 = 1.57
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