The Following Information Is Available for the Year Ended December

question 52

Multiple Choice

The following information is available for the year ended December 31, Year 1:
$\begin{array}{lc}\text { Net income } & \$ 844,200 \\\text { Net sales } & 6,809,000 \\\text { Average total assets } & 5,911,000\\\text { Average shareholders' equity }&2,575,000\end{array}$
-Refer to the figure Red Oak Manufacturing.What is the total leverage per the DuPont analysis computation?

• A) 2.30
• B) 2.64
• C) 12.40
• D) 15.20

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Definitions:

Days' Sales

Days' Sales, often referred to as Days Sales Outstanding (DSO), measures the average number of days it takes a company to collect payment after a sale has been made.

Inventory

Inventory is the total amount of goods and materials held by a company for the purpose of resale or production.

Return on Total Assets

Return on Total Assets is a financial ratio that measures the profitability of a company in relation to its total assets, indicating how effectively a company is using its assets to generate earnings.

Profitability

The ability of a company to generate earnings above its costs and expenses over time.