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Homework answers / question archive / Exercise 16-4 (Algo) Financial Ratios for Debt Management (L016-4] Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below

Exercise 16-4 (Algo) Financial Ratios for Debt Management (L016-4] Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below

Accounting

Exercise 16-4 (Algo) Financial Ratios for Debt Management (L016-4] 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 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 $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 $26. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1,230 9,500 12,600 650 23,980 $ 1,240 7,900 11,600 630 21,370 Land 9,500 44,964 54,464 $78,444 9,500 38,822 48,322 $69,692 Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $19,500 1,000 $18,400 780 150 19,330 20,500 9,300 29,800 9,300 28,630 2,000 4,000 6,000 42,644 48,644 $78,444 2,000 4,000 6,000 35,062 41,062 $69,692 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $75,000 $66,000 Cost of goods sold 43,000 41,000 Gross margin 32,000 25,000 Selling and administrative expenses: Selling expenses 10,700 Administrative expenses 10,500 7,400 6,700 Total selling and administrative expenses 18, 100 17,200 Net operating income 7,800 Interest expense 930 930 22 Net income before taxes 6,870 Income taxes 5,188 2,748 Net income 7,782 4,122 Dividends to common stockholders 200 500 Net income added to retained earnings 7,582 3,622 Beginning retained earnings 35,062 31,440 Ending retained earnings $42,644 $35,062 13,900 12,970 Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier. (For all requirements, round your answers to 2 decimal places.) 1 2 Times interest earned ratio Debt-to-equity ratio Equity multiplier 3

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