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 700,000 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 $0.75 last year and $0.40 this year. The market value of the company's common stock at the end of the year was $26. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Accounts receivable, net Inventory Prepaid expenses $1,130 1,280 7,700 10,700 530 20,210 9,400 13,700 24,940 10,700 Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: 10,700 38,52836 359 49,22847:039 $74,168 $67,269 Accounts payable $19,400 1,040 270 20,710 $18,800 870 270 19,940 Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: 8,100 28,040 8,100 28,810 26-85 Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total..liabilities.and..:tockholders..squitv 700 4,000 4,700 34,529 39,229 74,168...567.269 700 4,000 4,700 40,658 45,358

Explanation / Answer

Working capital = Current assets-Current liabilities =24940-20710= 4230 Current ratio = Current assets/Current liabilities =24940/20710= 1.20 Acid-test ratio =(Current assets-Inventory-Prepaid expenses)/Current liabilities =(24940-13700-710)/20710= 0.51

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