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 800,000 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 this year was $18. All of the company's sales are on account Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1.280 12.300 9.900 1.800 25,000 $ 1.560 9.100 8,300 2.100 20, 960 6.000 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 Recounts payable Accrued liabilities Notes payable, short ter Total current liabilities Long-term liabilities: Bonds payable 6.000 19,200 25,200 $50,280 25.000 $45,960 $9.500 $ 8,300 700 10,400 9, 300 5,000 5,000

Answer 1

1)	Average Account Receivables = (beginning Account Receivables + ending Account Receivables)/2
	= ( $9100+12300)/2
	= $ 10700
	Account Receivables Turnover Ratio = Sales / average Account Receivables
	= $79000/10700
	=7.38 times
2)	Average Collection Period = 365/ Account Receivables turnover ratio
	= 365 days /7.38
	=49.46 days
3)	Average Inventory = (beginning inventory + ending inventory)/2
	= ( $9700+8200)/2
	= $ 8950
	Inventory Turnover Ratio = Cost of goods sold / average inventory
	= $52000/8950
	=5.81 times
4)	Average Sales period = 365/ inventory turnover ratio
	= 365 days /5.81
	=62.82 days
5)	Operating Cycle = Average Sales Period + Average Collection Period
	=49.96+62.82
	=112.78 Days
6)	Average Assets = (beginning Assets + ending Assets)/2
	= ( $45960+50280)/2
	= $ 48120
	Assets Turnover Ratio = Sales / average Assets
	= $79000/48120
	=1.64 times

Answer 2

#5. Operating cycle is 112.28 days. Average sales period should be 49.46 not 49.96.