8 Comparative financial statements for Weller Corporation, a merchandising compa

Question

8 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 600,000 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 company's common stock at the end of this year was $29. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) points This Year Last Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses $ 1,280 1,230 7,700 11,600 690 10,700 13,700 680 eBook Total current assets Property and equipment: References 10,300 42,098 10,300 38,824 52,398 49,124 $78,758 $70,344 Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders Equity Current liabilities: Accounts payable $18,500 $19,400 1,060 840 110 20, 350 Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: 19,560 Bonds payable Total liabilities Stockholders' equity: 8,600 28,160 8,600 28,950 2,000 4,000 6,000 44,598 2,000 4,000 6,000 35,394 Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 50,598 _41,394 $70,344 $78,758

Explanation / Answer

Solution 1:

Times interest earned ratio = EBIT / Interest = $16,600 / $860 = 19.30 times

Solution 2:

Debt to equity ratio = Total liabilities / Shareholder's Equity = $28,160 / $50,598 = 0.56

Solution 3:

Equity Multiplier = Total Assets / Stockholder's Equity = $78,758 / $50,598 = 1.56

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