Comparative financial statements for Weller Corporation, a merchandising company

Question

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 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 $0.75 last year and $0.40 this year. The market value of the company's common stock at the end of this year was $26. All of the company's sales are on account.

Explanation / Answer

1) Working capital = Current assets-Current liabilities

= 24150-20710

Working capital = 3440

2) Current ratio = 24150/20710 = 1.17

3) Acid test ratio = (24150-12100-750)/20710 = 0.55

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