Comparative financial statements for Weller Corporation a me

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 990,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their 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 $28. All of the company’s sales are on account.

Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

Solution

Ans. 1 Gross margin percentage = (Net sales - cost of goods sold) / Net sales

= (98,000-61,500)/98000

= 36,500/98,000

= (0.3724) x 100

= 37.2

Ans. 2 Net profit margin percentage = Net Income / Net sales

= 6,600/98,000

= (0.0673) x 100

= 6.7

Ans. 3 Return on total asset = Net operating income/ Total net assets

= 12,200/63,774

= (0.1913) x 100

= 19.1

Ans. 4 Return on equity = Net income / Shareholder\'s Equity

= 6,600/40,904

= (0.16135) x 100

= 16.1