2 Comparative financial statements for Weller Corporation, a merchandising compa

Question

2 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 800,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 12%. The income tax rate was 40% and the dividend per share of common stock wes S0.40 this year. The market value of the company's common stock at the end of the year was $18. All of the company's sales are on account. oints Weller Corporation Comparative Balance Sheet (dollars in thousands) Current assetsi Cash Accoanta receivable, net Inventory Prepaid expenses s 1,280 12.300 9,700 $ 1,560 9.100 B,200 2,100 -....1800 Total earrent assets Property and equipment 25.080 Print Buildings and equipment, net Total property and equipeent 6,000 19.200 6,000 19.000 25 20025000 $50,280 $45,960 Liabilities and Stockholders: Equity Current 1Labilities s 9.500,300 700 Accounts payable Accraed liabilities 600 Sotes payable, short term Total current abilities Long-tern liab11itsess 10,400 9.300 Bands peyable Total 1labi1itie stockboidasai l Suty Comnon stock 800 Adoitional pasd-in copital Total paid-in cepital Retasned earniag hotal stockholder equityY 4,200 ,000 29.880 5.000 26.660 50.280$45,960

Explanation / Answer

Answer to Part 1:
Accounts Receivable Turnover = Sales / Average Accounts Receivable
Average Accounts Receivable = (12,300 + 9,100) / 2
Average Accounts Receivable = $10,700

Accounts Receivable Turnover = 79,000 / 10,700
Accounts Receivable Turnover = 7.38

Answer to Part 2:
Average Collection Period = 365 / Accounts Receivable Turnover
Average Collection Period = 365 / 7.38
Average Collection Period = 49.46 days

Answer to Part 3:
Inventory Turnover = Cost of Goods sold / Average Inventory
Average Inventory = (9,700 + 8,200) / 2
Average Inventory = $8,950

Inventory Turnover = 52,000 / 8,950
Inventory Turnover = 5.81

Answer to Part 4:
Average Sales Period = 365 / Inventory Turnover
Average Sales Period = 365 / 5.81
Average Sales Period = 62.82 days

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