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 840,000 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 was $0.40 this year. The market value of the company’s common stock at the end of the year was $20. All of the company’s sales are on account. |
Weller Corporation Comparative Balance Sheet (dollars in thousands) |
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This Year | Last Year | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 6,344 | $ | 6,400 | ||
Accounts receivable, net | 12,700 | 9,300 | ||||
Inventory | 9,900 | 8,360 | ||||
Prepaid expenses | 1,840 | 2,180 | ||||
Total current assets | 30,784 | 26,240 | ||||
Property and equipment: | ||||||
Land | 6,400 | 6,400 | ||||
Buildings and equipment, net | 19,600 | 19,400 | ||||
Total property and equipment | 26,000 | 25,800 | ||||
Total assets | $ | 56,784 | $ | 52,040 | ||
Liabilities and Stockholders' Equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 9,900 | $ | 8,500 | ||
Accrued liabilities | 680 | 900 | ||||
Notes payable, short term | 340 | 340 | ||||
Total current liabilities | 10,920 | 9,740 | ||||
Long-term liabilities: | ||||||
Bonds payable | 10,000 | 10,000 | ||||
Total liabilities | 20,920 | 19,740 | ||||
Stockholders' equity: | ||||||
Common stock | 840 | 840 | ||||
Additional paid-in capital | 4,400 | 4,400 | ||||
Total paid-in capital | 5,240 | 5,240 | ||||
Retained earnings | 30,624 | 27,060 | ||||
Total stockholders' equity | 35,864 | 32,300 | ||||
Total liabilities and stockholders' equity | $ | 56,784 | $ | 52,040 | ||
Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) |
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This Year | Last Year | |||||
Sales | $ | 83,000 | $ | 78,000 | ||
Cost of goods sold | 54,000 | 50,000 | ||||
Gross margin | 29,000 | 28,000 | ||||
Selling and administrative expenses: | ||||||
Selling expenses | 8,900 | 8,400 | ||||
Administrative expenses | 12,400 | 11,400 | ||||
Total selling and administrative expenses | 21,300 | 19,800 | ||||
Net operating income | 7,700 | 8,200 | ||||
Interest expense | 1,200 | 1,200 | ||||
Net income before taxes | 6,500 | 7,000 | ||||
Income taxes | 2,600 | 2,800 | ||||
Net income | 3,900 | 4,200 | ||||
Dividends to common stockholders | 336 | 630 | ||||
Net income added to retained earnings | 3,564 | 3,570 | ||||
Beginning retained earnings | 27,060 | 23,490 | ||||
Ending retained earnings | $ | 30,624 | $ | 27,060 | ||
Required: |
Compute the following financial data for this year: |
1. |
Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) |
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2. |
Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) |
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3. |
Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) |
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4. |
Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) |
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Answer- 1)- Gross profit percentage = (Gross profit/Net Sales)*100
= ($29000/$83000)*100
= 34.9%
2)- Net profit margin percentage = (Net income/Net sales)*100
= ($3900/$83000)*100
= 4.7%
3)- Return on total assets =(Net income/Average total assets)*100
={$3900/($52040+$56784)/2}*100
=($3900/$54412)*100
=7.2%
4)- Return on common stockholder’s equity=Net income-Preferred dividends/Average common stockholder’s equity
= {$3900/($32300+$35864)/2}
= ($3900/$34082)*100
= 11.44%
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