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Exercise 16-3 (Algo) Financial Ratios for Asset Management [LO16-3]

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 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 $0.75 last year and $0.40 this year. The market value of the companys common stock at the end of this year was $29. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year	Last Year
Assets
Current assets:
Cash	$ 1,140	$ 1,310
Accounts receivable, net	9,100	8,000
Inventory	12,400	11,500
Prepaid expenses	720	700
Total current assets	23,360	21,510
Property and equipment:
Land	10,900	10,900
Buildings and equipment, net	42,525	36,100
Total property and equipment	53,425	47,000
Total assets	$ 76,785	$ 68,510
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 18,700	$ 17,600
Accrued liabilities	970	790
Notes payable, short term	300	300
Total current liabilities	19,970	18,690
Long-term liabilities:
Bonds payable	8,000	8,000
Total liabilities	27,970	26,690
Stockholders' equity:
Common stock	700	700
Additional paid-in capital	4,000	4,000
Total paid-in capital	4,700	4,700
Retained earnings	44,115	37,120
Total stockholders' equity	48,815	41,820
Total liabilities and stockholders' equity	$ 76,785	$ 68,510

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year	Last Year
Sales	$ 75,240	$ 66,000
Cost of goods sold	44,215	37,000
Gross margin	31,025	29,000
Selling and administrative expenses:
Selling expenses	11,400	11,000
Administrative expenses	6,700	6,400
Total selling and administrative expenses	18,100	17,400
Net operating income	12,925	11,600
Interest expense	800	800
Net income before taxes	12,125	10,800
Income taxes	4,850	4,320
Net income	7,275	6,480
Dividends to common stockholders	280	700
Net income added to retained earnings	6,995	5,780
Beginning retained earnings	37,120	31,340
Ending retained earnings	$ 44,115	$ 37,120

5. Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.)

6. Total asset turnover. (Round your answer to 2 decimal places.)

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