ezto.mheducation.com Exercises 13-2 UrbanSitter Comparative financial statements

Question

ezto.mheducation.com Exercises 13-2 UrbanSitter 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 $20. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets $ 1,250 1,290 9,900 7,800 3,600 11,200 600 Cash Aocounts receivable, net 690 Prepaid expenses Total current assets 25,440 20,890 Property and equipment 10,200 10,200 45,146 41,248 Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity 55,346 51,448 $80,786 $72,338 Current liabilities: Accounts payable Accrued liabilities Notes payable, short term $19,700 $19,400 780 060250 20,760 20,430 8,700 8,700 29,460 29,130 Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock 2,000 2,000 Additional paid-in capital 4,000 4,000 6,000 6,000 Total paid-in capital Retained eamings 45,326 37.208 51,326 43,208 $80,786 $72,338 Total stockholders' equity Total liabilities and stockholders' equity

Explanation / Answer

This Year Last Year Times Interest Earned ratio (a/b)               17.59               14.25 EBIT (a)            15,300            12,400 Interest Expense (b)                  870                  870 Debt Equity ratio (c/d)                 0.57                 0.67 Total Liabilities ( c)            29,460            29,130 Equity (d)            51,326            43,208 Equity Multiplier (e/f)                 1.57                 1.67 Total Assets (e )            80,786            72,338 Shareholders equity (f )            51,326            43,208 Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to honor its debt payments. It may be calculated as either EBIT or EBITDA divided by the total interest payable. Interest Charges = Traditionally "charges" refers to interest expense found on the income statement Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a company's total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity. Equity Multiplier. The equity multiplier is a straightforward ratio used to measure a company's financial leverage. The ratio is calculated by dividing total assets by total equity. When a company purchases major assets, it can finance those purchases by incurring debt or issuing stock

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.