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 700,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $.75. The market value of the company’s common stock at the end of the year was $25. 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 $ 1,160 $ 1,270
Accounts receivable, net 9,500 8,000
Inventory 12,100 12,400
Prepaid expenses 730 660
Total current assets 23,490 22,330
Property and equipment:
Land 10,200 10,200
Buildings and equipment, net 43,324 40,027
Total property and equipment 53,524 50,227
Total assets $ 77,014 $ 72,557
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 18,800 $ 18,800
Accrued liabilities 1,060 850
Notes payable, short term 0 190
Total current liabilities 19,860 19,840
Long-term liabilities:
Bonds payable 9,300 9,300
Total liabilities 29,160 29,140
Stockholders' equity:
Common stock 2,000 2,000
Additional paid-in capital 4,000 4,000
Total paid-in capital 6,000 6,000
Retained earnings 41,854 37,417
Total stockholders' equity 47,854 43,417
Total liabilities and stockholders' equity $ 77,014 $ 72,557
Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
This Year Last Year
Sales $ 69,000 $ 66,000
Cost of goods sold 41,000 36,000
Gross margin 28,000 30,000
Selling and administrative expenses:
Selling expenses 11,400 10,200
Administrative expenses 7,400 6,700
Total selling and administrative expenses 18,800 16,900
Net operating income 9,200 13,100
Interest expense 930 930
Net income before taxes 8,270 12,170
Income taxes 3,308 4,868
Net income 4,962 7,302
Dividends to common stockholders 525 525
Net income added to retained earnings 4,437 6,777
Beginning retained earnings 37,417 30,640
Ending retained earnings $ 41,854 $ 37,417
Required: Compute the following financial ratios for this year:
1. Times interest earned ratio. (Round your answer to 1 decimal place.)
2. Debt-to-equity ratio. (Round your answer to 2 decimal places.)
3. Equity multiplier. (Round your answer to 2 decimal places.)