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 810,000 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 $18. 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

1. Gross Margin = Gross Profit/Total Sales Revenue = $27,500/$80,000 = 0.34375 pr 34.375%

2. Net Profit Margin = Net Profit/Sales Revenue = $6,800/$80,000 = 0.085 or 8.5%

3. Return on Total Assets = EBIT/Average Total Assets

EBIT = $6,800

Average Total Assets = (Total Assets This year + Total Assets last year)/2 = ($51,906+$47,480)/2 = $49,693

Return on Total Assets = $6,800/$49,693 = 0.13684 or 13.684%

4. Return on Equity = Net Income/Average Shareholders equity

Net Income = $3,306

Average Shareholders Equity = (Equity this year+equity last year)/2 = ($35,126+$31,820)/2 = $33,473

Return on Equity = $3,306/$33,473 = 0.098766 = 9.88%