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 slock during the year. A total of 970,000 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 divdend per share of common stock was so.40 this year. The market value of the company's common stock at the end of the year was $26. All of the companys sales are on account Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets Cash Accounts receivable, net Inventory Prepaid expenses $ 3,302 $ 4,230 16,100 9,100 10,550 8,880 1,970 2.440 Total current assets 31,922 24,650 Property and equipment: Land 7,700 7.700 Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders Equity 20,90020,700 28,600 28,400 $60,522 $3,050 Current liabilities: Accounts payable Accrued liabilities Notes payable, short term $11,200 9,160 940 1,550 470 470 12,610 11,170 7,500 7,500 20,11018,670 Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders equity: 970 970 Common stock Additional paid-in capital 5,050 5,050 6,0206,020 Total paid-in capital Retained earnings 34,392 28,360 40,41234,380 $60,522 $53,050 Total stockholders' equity Total liabilities and stockhoiders' equity Weller Corporation

Explanation / Answer

1. Gross margin percentage = Gross Margin / Sales

= 35,500 / 96,000

= 37%

2. Net profit margin percentage = Net profit / Sales

= 6,420 / 96,000

= 6.7%

3. Average total assets = (60,522 + 53,050) / 2 = 56,786

Return on total assets = Net income / Average total assets

= 6,420 / 56,786

= 11.3%

4. Average Equity = (40,412 + 34,380) / 2 = 37,396

Return on equity = Net income / Average equity

= 6,420 / 37,396

= 17.2%

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