The WFCO inverter is a Pure Sine Wave Inverter, so modified sine wave inverters have no bearing on the OP's observation.
I think the Silverback has room for 3 or less batteries, the Cedar Creek has room for 4 batteries. It looks like 2 batteries in picture above. 116V is within 120V +/- 10%% and OK.
If you have 2 12V batteries, consider adding a third battery. If you do, try to match the new battery with the existing batteries. Also check the gauge of the battery cables. I would hope for 2 AWG, not 4 AWG or higher (thinner).
The yellow light indicates "battery back up status". That is normal when not plugged into 120VAC.