19 4.8 Exercise 4 Using the following information, answer the questions listed below: Dana Dairy Products Key Ratios Industry Actual Actual Average 2012 2013 Current ratio 10 Quick ratio 0.8 0.75 Average collection period 23 days 30 days Inventory turnover 21.7 Debt ratio 64.7% 50% Times interest earned 5.5 Gross profit margin 13.6% 12.0% Net profit margin 1.0% 0.5% Return on total assets 2.9% 2.0 % Return on equity 8.2% 4.0% Income Statement Dana Dairy Products For the Year Ended December 31, 2013 Sales revenue $100,000 Less: Cost of goods sold 87,000 Gross profits $ 13,000 Less: Operating expenses 11,000 Operating profits $ 2,000 Less: Interest expense Net profits before taxes $ 1,500 Less: Taxes (40%) 600 Net profits after taxes 000 Balance Sheet Dana Dairy Products December 31, 2013 500 $1,000 8.900 4.380 $14.250 Cash Accounts receivable Inventories Total current assets Gross fixed assets Less: Accumulated depreciation Net fixed assets Total assets $35,000 13.250 21.750 $36,000 Liabilities & Stockholders' Equity Accounts payable Accruals Total current liabilities Long-term debt Total liabilities Common stock Retained earings Total stockholders' equity Total liabilities & stockholders equity $9.00 6.05 $15,675 4.125 $19,800 15.210 $16.200 SLO Required: Calculate the following ratios for 2013: a. Current ratio. b. Net working capital c. Inventory turnover d. Average collection period e. Gross profit margin f. Net profit margin g. Return on assets h. Return on equity ii. Based on the calculations in part (i) above, comment on the performance of the company as compared to its industry and its own last year results