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Exercise 15-3 Financial Ratios for Asset Management [LO15-3]

Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal 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 $0.50. The market value of the companys common stock at the end of the year was $23. All of the companys sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year			Last Year
Assets
Current assets:
Cash	$	1,180		$	1,330
Accounts receivable, net		10,200			7,300
Inventory		13,500			10,900
Prepaid expenses		720			520
Total current assets		25,600			20,050
Property and equipment:
Land		10,100			10,100
Buildings and equipment, net		48,628			37,762
Total property and equipment		58,728			47,862
Total assets	$	84,328		$	67,912
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	20,300		$	18,600
Accrued liabilities		1,030			800
Notes payable, short term		110			110
Total current liabilities		21,440			19,510
Long-term liabilities:
Bonds payable		8,800			8,800
Total liabilities		30,240			28,310
Stockholders' equity:
Common stock		500			500
Additional paid-in capital		4,000			4,000
Total paid-in capital		4,500			4,500
Retained earnings		49,588			35,102
Total stockholders' equity		54,088			39,602
Total liabilities and stockholders' equity	$	84,328		$	67,912

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	77,000		$	64,000
Cost of goods sold		34,160			40,000
Gross margin		42,840			24,000
Selling and administrative expenses:
Selling expenses		10,600			10,500
Administrative expenses		6,800			6,100
Total selling and administrative expenses		17,400			16,600
Net operating income		25,440			7,400
Interest expense		880			880
Net income before taxes		24,560			6,520
Income taxes		9,824			2,608
Net income		14,736			3,912
Dividends to common stockholders		250			250
Net income added to retained earnings		14,486			3,662
Beginning retained earnings		35,102			31,440
Ending retained earnings	$	49,588		$	35,102

Required:

Compute the following financial data for this year: 3. 2.)Inventory turnover. (Round your answer to 2 decimal places.) 3.)Operating cycle. (Round your intermediate calculations and final 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.) Total asset turnover. (Round your answer to 2 decimal places.)

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