Question

Exercise 14-6 Financial Ratios for Assessing Market Performance [LO14-6] 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 810,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, 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 $18.50. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 2,546 12,400 9,750 1,810 26,506 $ 2,770 9,150 8,240 2,120 22,280 6,100 19,300 25,400 $51,906 6,100 19,100 25,200 $47,480 Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 9,600 620 310 10,530 $ 8,350 750 310 9,410 6,250 16,780 6,250 15,660 810 4.250 5,060 30,066 35, 126 $51,906 810 4,250 5,060 26,760 31,820 $47,480 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Sales $80,000 Cost of goods sold 52,500 Gross margin 27,500 Selling and administrative expenses: Selling expenses 8,600 Administrative expenses 12,100 Total selling and administrative expenses 20,700 Last Year $75,000 48,500 26,500 8,100 11,100 19,200

Answer 1

Weller corporation (in dollars)

		Formula	this year ($)
a	Earnings per share	Earnings available to common shareholders / weighted average common Equity shares	36,30,000/810,000	$ 4.48
b	Price earnings ratio	market price (MPS) / Earnings per share (EPS)	18.50/4.48	4.13 times
c	Dividend payout ratio	Dividend per share (DPS) / EPS	0.40/4.48	8.93%
d	Dividend yield ratio	DPS / MPS	0.40/18.50	2.16%
e	Book value per share	Total shareholders equity / total number of shares	35,126,000/810,000	$ 43.37