Comparative financial statements for Weller Corporation, a merchandising company

Question

Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal 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 $1.25 last year and $0.90 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.

Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal 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 $1.25 last year and $0.90 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.

Explanation / Answer

(in $ Thousands) 1 Working Capital = Current Assets - Current Liabilities 25100 - 19780 $        5,320 2 Current ratio = Current Assets ÷ Current Liabilities 25100 ÷ 19780              1.27 3 Acid test ratio = (Cash + Accounts receivable, net) ÷ Current liabilities (1260+9300) ÷ 19780 10560 ÷ 19780              0.53

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