3. Equity multiplier. (Round your answer to 2 decimal places.) Comparative finan

Question

3. Equity multiplier. (Round your answer to 2 decimal places.) 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 500,000 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 $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 $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 $ 1,260 1,300 6,600 13,700 2,600 540 9,900 700 Total current assets 25,560 21,040 Property and equipment: Land 10,200 10,200 Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity 40,682 40,951 50,882 51,151 $76,442 $72,191 Current liabilities Accounts payable Accrued liabilities $18,500 $19,100 740 250 1,060 Notes payable, short term Total current liabilities Long-term liabilities 19,560 20,090 9,900 29,460 29,990 Bonds payable 9,900 Total liabilities Stockholders' equity: 2,000 Common stock Additional paid-in capital 2,000 4,000 4,000 Total paid-in capital Retained earnings 6,000 6,000 40,982 36,201 46,982 42,201 $76,442 $72,191 Total stockholders'equity Total liabilities and stockholders' equity Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)

Explanation / Answer

TIME INTEREST EARNNED RATIO

= EARNNING BEFORE INTEREST & TAX / INTEREST EXPENSES

= $10000 / $990

= 10.10 TIMES

DEBT EQUITY RATIO

= TOTAL LIBALITES / TOTAL EQUITY

= $29460 / $46982

= 0.63

EQUITY MULTIPLIER

= TOTAL ASSETS / TOTAL SHARE HOLDERS EQUITY

= $76442 / $46982

= 1.63

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