The short-term assets which are used for day-to-day operation of a business are called working capital of the business. It is computed by deducting the current liabilities from the current assets of a business.
A current ratio measures a company’s ability to pay back its short term liabilities by the current assets of the company. It is ascertained by dividing the current assets by the current liabilities of the company.
Acid-Test Ratio:
It measures the company’s ability to pay back its current liabilities by the quick assets of the company. Quick assets are those current assets which can be converted into cash in a very short period of time.
Computation of following financial data and ratios for this year:
1. Working capital
2. Current ratio
3. Acid-test ratio
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Introduction To Managerial Accounting
- Financial Ratios for Assessing Liquidity 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. Required: Compute the following financial data and ratios for this year: 1. Working capital. 2. Current ratio. 3. Acid-test ratio.arrow_forwardComparative 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 880,000 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 $22. All of the company’s sales are on account. Weller CorporationComparative Balance Sheet(dollars in thousands) This Year Last Year Assets Current assets: Cash $ 3,508 $ 4,340 Accounts receivable, net 15,200 10,150 Inventory 10,100 8,520 Prepaid expenses 1,880 2,260 Total current assets 30,688 25,270 Property and equipment: Land 6,800 6,800 Buildings and equipment, net 20,000 19,800 Total property and equipment 26,800 26,600 Total assets $ 57,488 $ 51,870…arrow_forwardComparative 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 970,000 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 $26.50. All of the company's sales are on account. 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: Accounts payable Accrued liabilities Weller Corporation Comparative Balance Sheet (dollars in thousands) Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total…arrow_forward
- 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 970,000 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 $26.50. All of the company's sales are on account. 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: Accounts payable Accrued liabilities Notes payable, short term liabilities Total current Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Weller Corporation…arrow_forwardComparative 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 980,000 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 the year was $27.00. All of the company’s sales are on account. Weller CorporationComparative Balance Sheet(dollars in thousands) This Year Last Year Assets Current assets: Cash $ 4,568 $ 5,440 Accounts receivable, net 16,200 9,150 Inventory 10,600 8,920 Prepaid expenses 1,980 2,460 Total current assets 33,348 25,970 Property and equipment: Land 7,800 7,800 Buildings and equipment, net 21,000 20,800 Total…arrow_forwardComparative 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 900,000 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 $23. All of the company's sales are on account. Required:Compute the following financial data for this year: 1. Gross margin percentage. (Round your percentage answer to 1 decimal place.)2. Net profit margin percentage. (Round your percentage answer to 1 decimal place.)3. Return on total assets. (Round your percentage answer to 1 decimal place.)4. Return on equity. (Round your percentage answer to 2 decimal places.)arrow_forward
- 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 890,000 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 the year was $22. All of the company’s sales are on account. Weller CorporationComparative Balance Sheet(dollars in thousands) This Year Last Year Assets Current assets: Cash $ 4,774 $ 5,550 Accounts receivable, net 15,300 10,200 Inventory 10,150 8,560 Prepaid expenses 1,890 2,280 Total current assets 32,114 26,590 Property and equipment: Land 6,900 6,900 Buildings and equipment, net 20,100 19,900 Total…arrow_forwardComparative 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 890,000 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 the year was $22. All of the company’s sales are on account. Weller CorporationComparative Balance Sheet(dollars in thousands) This Year Last Year Assets Current assets: Cash $ 4,774 $ 5,550 Accounts receivable, net 15,300 10,200 Inventory 10,150 8,560 Prepaid expenses 1,890 2,280 Total current assets 32,114 26,590 Property and equipment: Land 6,900 6,900 Buildings and equipment, net 20,100 19,900 Total…arrow_forwardComparative 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 890,000 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 the year was $22. All of the company’s sales are on account. Weller CorporationComparative Balance Sheet(dollars in thousands) This Year Last Year Assets Current assets: Cash $ 4,774 $ 5,550 Accounts receivable, net 15,300 10,200 Inventory 10,150 8,560 Prepaid expenses 1,890 2,280 Total current assets 32,114 26,590 Property and equipment: Land 6,900 6,900 Buildings and equipment, net 20,100 19,900 Total…arrow_forward
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