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 830,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 12%. 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.

Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

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 830,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 12%. 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.

Explanation / Answer

Gross profit percentage = gross profit *100/net sales

= 28500*100/82000

Gross profit percentage = 34.8%

Net profit percentage = net profit *100/net sales

= 3810*100/82000

Net profit percentage = 4.6%

Return on total assets = (net income+interest)*100/average total assets

= (3810+1050)*100/(55158+50520/2)

Return on total assets = 9.2%

Return on total equity = net income*100/average shareholder's equity

= 3810*100/(35618+32140/2)

Return on total equity = 11.25%

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