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 600,000 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 $0.40 this year. The market value of the company's common stock at the end of the year was $28. 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 1,350 0,200 7,200 13,200 11,000 590 730 Total current assets 25,310 20,140 Property and equipment: Land Buildings and equipment, net 10,100 10,100 39,236 37,858 49,336 47,958 $74,646 $68,098 Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Accrued liabilities $20,200 $17,700 750 190 1,010 Notes payable, short term Total current liabilities Long-term liabilities: 21,210 18,640 9,200 30,410 27,840 Bonds payable 9,200 Total liabilities Stockholders' equity: Common stock Additional paid-in capital 2,000 4,000 2,000 4,000 Total paid-in capital Retained earnings 6,000 6,000 38,236 34,258 44,236 40,258 $74,646 $68,098 Total stockholders' equity Total liabilities and stockholders' equity Weller Corporation Comparative Income Statement and Reconciliation dollars in thousands) Sales Cost of goods sold This Year Last Year $69,000 $64,000 43,000 39,000

Explanation / Answer

Solution:-

1. Times Interest Earned ratio

Net Incoem before Intt and Tax/Intt Expenses

= 8300/920

=

= 9.02 Times

2. Debt to equity Ratio = Total Liabilities/ share Holder's Equity

= 30410/44236

=0.69:1

3. Equity Multiplier:-

Total Assets/Share Holder's Equity

= 74646/44236

= 1.69

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