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 910,000 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 $24. 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 $ 1,506$ 1,720 15,500 10,300 10,2508,640 1,910 2,320 Total current assets 29,166 22,980 Property and equipment: Land Buildings and equipment, net 7,100 7,100 20,300 20,100 Total property and equipment 27,400 27,200 Total assets $56,566 50,180 Liabilities and Stockholders' Equity Current liabilities: $ 10,600 820 8,850 Accounts payable Accrued liabilities Notes payable, short term 410 1250 11,830 10,510 6,250 6,250 18,080 16,760 410 Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock 910 910 Additional paid-in capital 4,750 4,750 Total paid-in capital Retained earnings 5,6605,660 32,826 27,760 38,486 33,420 $56,566 $50,180 Total stockholders' equity Total liabilities and stockhokders' equity Weller Corporation Comparative Income Statement and Reconciliation dollars in thousands) This Year Last Year $90,000 $85,000 Sales

Explanation / Answer

Ratios

S.No. Formula Ratio 1. Earning Per Share=(Net Income-Preferred Dividend)/Shares Outstanding =(5430000-0)/910000 = 5.97 2. Price Earning Ratio=Market Value Per Share/Earning Per Share =24/5.97 = 4.02 3. Dividend PAyout Ratio=Dividend per Share/Earnings per Share =0.4/5.97 = 6.70 4. Dividend Yield Ratio=Dividend Per Share/Current Share Price =0.4/24 = 1.67 5. Book Value per share=(Stockholders' Equity-Preferred Stock)/Average shares outstanding =(38486000-0)/910000 = 42.29

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