Question

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 700,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, 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 $27. All of the company's sales are on account Weller Corporation Comparative Balance Sheet (dollars in thousands) Last Year This Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses $ 1250 $1,270 9,800 13,400 640 6,800 11,500 620 20,190 25.090 Total current assets Property and equipment Land Buildings and equipment, net 9,900 35,891 9,900 43.317 53,217 45,791 Total property and equipment $65,981 $78,307 Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Accrued liabilities Notes payable, short term $20,500 $17,600 940 100 900 100 Total current liabilities Long-term llabilities Bonds payable 21.540 18,600 8.900 8.900 27.500 30440 Total liabilities

Answer 1

Ans. 1	Working capital =     Total current assets - Total current liabilities
		$25,090 - $21,540
		$3,550
Ans. 2	Current ratio   =   Total current assets / Total current liabilities
		$25,090 / $21,540
		1.16 : 1
Ans. 3	Acid test ratio   =   (Total current assets - Inventory - Prepaid expenses) / Total current liabilities
		($25,090 - $13,400 - $640) / $21,540
		$11,050 / $21,540
		0.51 : 1