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 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 the year was $21. 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	$	1,230		$	1,270
Accounts receivable, net		10,100			7,900
Inventory		12,500			11,300
Prepaid expenses		740			630
Total current assets		24,570			21,100
Property and equipment:
Land		10,500			10,500
Buildings and equipment, net		43,914			39,152
Total property and equipment		54,414			49,652
Total assets	$	78,984		$	70,752
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	18,600		$	18,100
Accrued liabilities		910			740
Notes payable, short term		0			260
Total current liabilities		19,510			19,100
Long-term liabilities:
Bonds payable		8,300			8,300
Total liabilities		27,810			27,400
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		45,174			37,352
Total stockholders' equity		51,174			43,352
Total liabilities and stockholders' equity	$	78,984		$	70,752

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	68,000		$	64,000
Cost of goods sold		36,000			36,000
Gross margin		32,000			28,000
Selling and administrative expenses:
Selling expenses		10,800			10,100
Administrative expenses		7,000			6,300
Total selling and administrative expenses		17,800			16,400
Net operating income		14,200			11,600
Interest expense		830			830
Net income before taxes		13,370			10,770
Income taxes		5,348			4,308
Net income		8,022			6,462
Dividends to common stockholders		200			250
Net income added to retained earnings		7,822			6,212
Beginning retained earnings		37,352			31,140
Ending retained earnings	$	45,174		$	37,352

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