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 830,000 shares of common stock were outstanding. The interest rate on th face value, was 12%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. The market value of the company's common stock at the end of the year was $20. 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 Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment Buildings and equipment, net u ne Total property and equipment $ 5,078 12,600 9,850 1,830 29,358 $ 5,190 9,250 8,320 2.160 24,920 Trasa care are 250 2,20 and 6,300 6,300 19,500 19,300 25,800 25,600 $55,158 $50,520 Total assets Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short term $9.800 S 8.450 Total current liabilities Long-term liabilities Bonds payable $ 9,800 660 330 10.790 8.750 19,540 $ 8,450 850 330 9,630 8.750 18.380 Total liabilities

Answer 1

(1) gross margin percentage is the ratio of gross income and sales.

Gross income = sales-cost of goods sold

this year Gross margin percentage = Gross margin/ sales *100

=28,500/82,000

=34.8%

(2) net profit margin percentage is ratio of net profit and sales.Higher the percentage better the performance of the firm.

net profit percentage = net profit / sales *100

=3,810 / 82,000

=4.6 %

(3)return on total asset measures how efficiently the invested assets are used.it is the ratio between earnings before interest and taxes and average total assets.

Earnings before interest and taxes = $6350+$1050

=$7400

average total asset = asset at the beginning of this year +asset at the end of this year / 2

(55158+50520)/2

=52,839$

return on total asset = Earnings before interest and taxes / average total assets

7400/52839

=14.00%

(4)return on equity measures how efficiently the shareholder's funds are used to generate profits.

return on equity = net income / average total stockholder's equity

average stock holder's equity = stockholder's equity at the beginning + at the end /2

=(35618+32140)/2

=$33,879

return on equity = $3,810/$33,879

=11.25%