Question

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 the year was $24. 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	$	1,240		$	1,210
Accounts receivable, net		9,100			6,800
Inventory		13,200			11,800
Prepaid expenses		610			610
Total current assets		24,150			20,420
Property and equipment:
Land		9,600			9,600
Buildings and equipment, net		45,166			40,648
Total property and equipment		54,766			50,248
Total assets	$	78,916		$	70,668
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	19,900		$	18,700
Accrued liabilities		1,000			890
Notes payable, short term		0			250
Total current liabilities		20,900			19,840
Long-term liabilities:
Bonds payable		8,200			8,200
Total liabilities		29,100			28,040
Stockholders' equity:
Common stock		2,000			2,000
Additional paid-in capital		4,000			4,000
Total paid-in capital		6,000			6,000
Retained earnings		43,816			36,628
Total stockholders' equity		49,816			42,628
Total liabilities and stockholders' equity	$	78,916		$	70,668

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	72,000		$	64,000
Cost of goods sold		41,000			36,000
Gross margin		31,000			28,000
Selling and administrative expenses:
Selling expenses		10,800			10,700
Administrative expenses		7,000			6,500
Total selling and administrative expenses		17,800			17,200
Net operating income		13,200			10,800
Interest expense		820			820
Net income before taxes		12,380			9,980
Income taxes		4,952			3,992
Net income		7,428			5,988
Dividends to common stockholders		240			300
Net income added to retained earnings		7,188			5,688
Beginning retained earnings		36,628			30,940
Ending retained earnings	$	43,816		$	36,628

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.)

Answer 1