ezto.mheducation.com UrbanSitter Comparative financial statements for Weller Cor

Question

ezto.mheducation.com UrbanSitter 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 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 $0.40 this year. The market value of the company's common stock at the end of the year was $27. 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 $ 1,150 1,390 9,400 7,800 3,400 11,300 550 Prepaid expenses 630 Total current assets 24,580 21,040 Property and equipment Land 10,500 10,500 Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity 50,833 40,676 1,333 51,176 $85,913 $72,216 Current liabilities: Accounts payable Accrued liabilities $19,900 $19,200 730 160 1,070 160 Notes payable, short term Total current liabilities Long-term liabilities: 21,130 20,090 9,4009,400 30,530 29,490 Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital 600 4,000 600 4,000 4,6004,600 Total paid-in capital Retained eamings 50,783 38,126 55,383 42,726 $85,913 $72,216 Total stockholders' equity Total liabilities and stockholders' equity

Explanation / Answer

Accounts receivable Turnover= Net Annual Credit Sales / ((Beginning Accounts Receivable + Ending Accounts Receivable)/2) = 79120/((7800+9400)/2)= 9 Days Average Collection Period= 365/Accounts receivable Turnover = 41 Days Average Sale Period= 365 / inventory Turnover, where Inventory Turnover = Cost of Goods Sold/Average Inventory = 365/3= 122 Days = 38285/((11300+13400)/2) = 3.1 Operating Cycle = COGS/365= 38285/365= 105 days

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