Comparative financial statements for Weller Corporation, a merchandising company

Question

Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal 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 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. The market value of the company's common stock at the end of the year was $27. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet dollars in thousands) This Year Last Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses $ 1,180 $ 1,330 10,800 7.200 13,300 10,800 580 680 Total current assets 25,960 19,910 Property and equipmenl: Land 9.200 9.200 Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity 45,234 42,567 54,434 51,767 $80,394 $71,677 Current liabilities: Accounts payable Accrued liabilities $20,000 $19,300 750 200 940 200 Notes payable, short te 21,140 20,250 8,300 8,300 29.440 28,550 Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity Common stock 500 Additional paid-in capit 4,000 4,000 4,500 4,500 Total paid-in capital Retained earnings 46,454 38,627 60,954 43,127 $80,394 $71,677 Total stockholders equity Total liabilities and stockhoilders' equity zto mheducation.com

Explanation / Answer

1. Working capital = Current assets-current liabilities

= (25960-21140)

Working capital = 4820

2. Current ratio = Current assets/current liabilities

= 25960/21140

Current ratio = 1.23:1

3. Acid test ratio = (cash+account receivable)/Current liabilities

= (1180+10800)/21140

Acid test ratio = 0.57:1

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