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 960,000 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 $26. 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 $ 2,036 3,020 9,050 8,840 2,420 16,000 10,500 1,960 Total current assets 30,496 23,330 Property and equipment: Land Buildings and equipment, net 7,600 7,600 20,800 20,600 28,400 28,200 $58,896 $51,530 Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Accrued liabilities $11,100 9,100 1,500 460 920 460 Notes payable, short term Total current liabilities Long-term liabilities: 12,480 11,060 6,250 18,730 17,310 Bonds payable 6,250 Total liabilities Stockholders' equity: Common stock Additional paid-in capital 960 5,000 960 5,000 5,960 Total paid-in capital Retained earnings 5,960 34,206 28,260 40,166 34,220 $58,896 $51,530 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 $95,000 $90,000 60,000 56,000

Explanation / Answer

6330000/55213000* = 11.5%

*(51530000+58896000)/2=55213000

6330000/37193000* = 17.02%

*(34220000+40166000)/2=37193000

S.No. Ratio's Formula Ratio 1 Gross Margin percentage=Gross Margin/Net Sales (35000000/95000000)*100 = 36.8% 2 Net Profit Margin percentage=Net Income/Net sales (6330000/95000000)*100 = 6.7% 3 Return on total assets= Net Income/Average Total Asset

6330000/55213000* = 11.5%

*(51530000+58896000)/2=55213000

4 Return on stockholders’ equity= Net Income/stockholders’ equity

6330000/37193000* = 17.02%

*(34220000+40166000)/2=37193000

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