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 600,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at th 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 $23. All of t company's sales are on account. did not issue any new common stock during the year. A total o Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses $ 1,250 $ 1,390 10,400 7,200 13,600 11,500 510 770 Total current assets 26,020 20,600 Property and equipment: Land Buildings and equipment, net 9,700 9,700 43,946 38,518 53,646 48,218 $79,666 $68,818 Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Accrued liabilities $19,900 $ 18,200 880 270 980 Notes payable, short term 20,880 19,350 Total current liabilities Long-term liabilities Bonds payable 9,700 9,700

Explanation / Answer

RATIOS FORMULA THIS YEAR 1. Times interest earned ratio Net operating Income / Interest expense 16,900 / 970 = 17.4 times 2. Debt-to-equity Long term debt / Total stockholder's equity 9,700 / 49,086 = 0.19:1 3. Equity multilplier Total Assets / Total equity 79,666 / 49,086 = 1.62

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