$\text { Dana Dairy Products Key Ratio }$ Income Statement
Dana Dairy Products
for the Year Ended December

question 98

Multiple Choice

$\text { Dana Dairy Products Key Ratio }$
$\begin{array}{lll}\hline&\text { Industry } & \text { Actual } & \text { Actual } \\&\text { Average } & 2001 & 2002\\\hline\text { Current Ratio } & 1.3 & 1.0 \\\text { Quick Ratio } & 0.8 & 0.75 \\\text { Average collection Period } & 23 \text { days } & 30 \text { days } \\\text { Inventory Turnover } & 21.7 & 19 \\\text { Debt Ratio } & 64.7 \% & 50 \% \\\text { Times Interest Earned } & 4.8 & 5.5 \\\text { Gross Profit Margin } & 13.6 \% & 12.0 \% \\\text { Net Profit Margin } & 1.0 \% & 0.5 \% \\\text { Return on total assets } & 2.9 \% & 2.0 \% \\\text { Return on Equity } & 8.2 \% & 4.0 \%\end{array}$
Income Statement
Dana Dairy Products
For the Year Ended December 31, 2002
$$\begin{array} { l c } \hline \text { Sales Revenue } & \$ 100,000 \\\text { Less: Cost of Goods Sold } & 87,000 \\& - \cdots \\\text { Gross Profits } & \$ 13,000 \\\text { Less: Operating Expenses } & 11,000 \\& - \cdots \\\text { Operating Profits } & 2,000 \\\text { Less: Interest Expense } & 500 \\& - \cdots \\\text { Net Profits Before Taxes } & \$ 1,500 \\\text { Less: Taxes } ( 40 \% ) & 600\end{array}$$
Balance Sheet
Dana Dairy Products
December 31, 2002
ASSETS
$\begin{array}{lr}\hline \text { Cash } & \$ 1,000 \\\text { Accounts Receivable } & 8,900 \\\text { Inventories } & 4,350\\&----\\\text { Total Current Assets } & \$ 14,250 \\\text { Gross Fixed Assets } & \$ 35,000 & \\\text { Less: Accumulated Depreciation } & 13,250 \\\text { Net Fixed Assets }&21,750\\&----\\\text { Total Assets }&\$36,000\\\\\text { Liabilities \& Stockholders' Equity }\\\hline\text { Accounts Payable } & \$ 9,000 \\\text { Accruals } & 6,675\\&----\\\text { Total Current Liabilities } & \$ 15,675 \\\text { Long-term Debts } & 4,125\\&----\\\text { Total Liabilities }&\$19,800\\\text { Common Stock } & 1,000 \\\text { Retained Earnings } & 15,200\\&----\\\text { Total Stockholders' Equity }&\$16,200\\&----\\\text { Total Liab. \& S.E. }&\$36,000\end{array}$
-If Dana Dairy Products has credit terms which specify that accounts receivable should be paid in 25 days, the average collection period__________since 2001.

• A) has improved
• B) has deteriorated
• C) remained the same
• D) cannot be determined

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Definitions:

Responsibility

involves the duty or obligation to perform or complete a task, with an inherent accountability for the successful completion and outcomes.

Vendors

Businesses or individuals that sell products or services to other businesses or consumers.

Lease Decision

The choice between leasing or purchasing an asset, involving considerations of cost, duration, and financial impact.

Confidentiality

The obligation not to share or disclose information without proper authorization, especially information that is private, sensitive, or proprietary.