Exercise $14-3($Algo$)$ Financial Ratios for Asset Management $[$LO$14-3]$

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 $$0\mathrm{.}75$ last year and $$0\mathrm{.}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

Assets

Current assets:

Cash $ $1,150$ $ $1,270$

Accounts receivable, net $9,5008,300$

Inventory $13,10010,700$

Prepaid expenses $690630$

Total current assets $24,44020,900$

Property and equipment:

Land $10,90010,900$

Buildings and equipment, net $49,77633,840$

Total property and equipment $60,67644,740$

Total assets $ $85,116$ $ $65,640$

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ $19,700$ $ $17,900$

Accrued liabilities $1,080840$

Notes payable, short term $170170$

Total current liabilities $20,95018,910$

Long$-$term liabilities:

Bonds payable $9,0009,000$

Total liabilities $29,95027,910$

Stockholders' equity:

Common stock $600600$

Additional paid$-$in capital $4,0004,000$

Total paid$-$in capital $4,6004,600$

Retained earnings $50,56633,130$

Total stockholders' equity $55,16637,730$

Total liabilities and stockholders' equity $ $85,116$ $ $65,640$

Weller Corporation

Comparative Income Statement and Reconciliation

$($dollars in thousands$)$

This Year Last Year

Sales $ $83,660$ $ $64,000$

Cost of goods sold $35,70042,000$

Gross margin $47,96022,000$

Selling and administrative expenses:

Selling expenses $10,90010,100$

Administrative expenses $6,7006,100$

Total selling and administrative expenses $17,60016,200$

Net operating income $30,3605,800$

Interest expense $900900$

Net income before taxes $29,4604,900$

Income taxes $11,7841,960$

Net income $17,6762,940$

Dividends to common stockholders $240450$

Net income added to retained earnings $17,4362,490$

Beginning retained earnings $33,13030,640$

Ending retained earnings $ $50,566$ $ $33,130$

Required:

Compute the following financial data for this year:

$1.$ Accounts receivable turnover. $($Assume that all sales are on account.$)($Round your answer to $2$ decimal places.$)$

$2.$ Average collection period. $($Use $365$ days in a year. Round your intermediate calculations and final answer to $2$ decimal places.$)$

$3.$ Inventory turnover. $($Round your answer to $2$ decimal places.$)$

$4.$ Average sale period. $($Use $365$ days in a year. Round your intermediate calculations and final answer to $2$ decimal places.$)$

$5.$ Operating cycle. $($Round your intermediate calculations and final answer to $2$ decimal places.$)$

$6.$ Total asset turnover. $($Round your answer to $2$ decimal places.$)$Required:

Compute the following financial data for this year:

Accounts receivable turnover. $($Assume that all sales are on account.$)($Round your answer to $2$ decimal places.$)$

Average collection period. $($Use $365$ days in a year. Round your intermediate calculations and final answer to $2$ decimal places.$)$

Inventory turnover. $($Round your answer to $2$ decimal places.$)$

Average sale period. $($Use $365$ days in a year. Round your intermediate calculations and final answer to $2$ decimal places.$)$

Operating cycle. $($Round your intermediate calculations and final answer to $2$ decimal places.$)$

Total asset turnover. $($Round your answer to $2$ decimal places.$)$