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 stoc va 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. Time interest earned ratio = net operating income / interest expense

= $18800 / $990

= 18.99

2. Debt to equity ratio = Total liabilities / toal shareholder's equity

= $29690 / $49957

= 0.59

3. Equity multiplier = Total assets / toal shareholder's equity

= $79647 / $49957

= 1.59

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