Dana Dairy Products Key Ratios _________________________________________________
ID: 2420443 • Letter: D
Question
Dana Dairy Products Key Ratios
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Dana Industry Average
2008 2009
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Current Ratio 1.3 1.0
Quick Ratio 0.8 0.75
Average collection Period 23 days 30 days
Inventory Turnover 21.7 19
Debt Ratio 64.7% 50%
Times Interest Earned 4.8 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, 2009
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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 500
Net Profits Before Taxes $ 1,500
Less: Taxes (40%) 600
Net Profits After Taxes $ 900
Balance Sheet
Dana Dairy Products
December 31, 2009
ASSETS
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Cash $ 1,000
Accounts Receivable 8,900
Inventories 4,350
Total Current Assets $14,250
Gross Fixed Assets $35,000
Less: Accumulated Depreciation 13,250
Net Fixed Assets 21,750
Total Assets $36,000
LIABILITIES & STOCKHOLDER”S EQUITY
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Accounts Payable $ 9,000
Accruals 6,675
--
Total Current Liabilities $15,675
Longterm Debts 4,125
Total Liabilities $19,800
Common Stock 1,000
Retained Earnings 15,200
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Total Stockholders' Equity $16,200
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Total Liab. & S.E. $36,000
Evaluate the financial results of Dana Dairy Products for fiscal year end 2009 in the following areas; liquidity, activity, debt, profitability, and market.
Explanation / Answer
The most commonly used liquidity ratios are current ratio , quick ratio and times interest earned ratio . these ratios evaluate the ability of a company to pay off its current liabiltiies
Current raion = $14,250/15,675 = .909
Quick ratio =9,900/15,675 = .63
Times interest earned ratio=2000/500 = 4 times
Since its liquidity ratios are below industry average we can say that its liquidity position is not good
Activity ratios are those ratios which can convert assets, liabilities and capital into cash
Average collection period = 100,000/8,900 = 11.23 days
inventory turnover -=87,000/8,900 = 9.78 days
Fixed asset turover -=100,000/21,750 = 4.60 times
This ratio is better than industry average hence its collection of debts is good and inventroy does not stay longer in inventory
Debt ratio shows solvency of a firm it is total liabilities divided by total assets
=19,800/21,750 = .91
lower ratio indicate stable business
Profitabiltiy ratio
Gross profit=13,000/100,000 = 13%
Net profit margin =900/100,000 = .9%
Slightly lower than industry average
Market ratios are used to find the value of company
Earnings per share = net income/ common stock
= 900/1000 = $.9 per share
The most commonly used liquidity ratios are current ratio , quick ratio and times interest earned ratio . these ratios evaluate the ability of a company to pay off its current liabiltiies
Current raion = $14,250/15,675 = .909
Quick ratio =9,900/15,675 = .63
Times interest earned ratio=2000/500 = 4 times
Since its liquidity ratios are below industry average we can say that its liquidity position is not good
Activity ratios are those ratios which can convert assets, liabilities and capital into cash
Average collection period = 100,000/8,900 = 11.23 days
inventory turnover -=87,000/8,900 = 9.78 days
Fixed asset turover -=100,000/21,750 = 4.60 times
This ratio is better than industry average hence its collection of debts is good and inventroy does not stay longer in inventory
Debt ratio shows solvency of a firm it is total liabilities divided by total assets
=19,800/21,750 = .91
lower ratio indicate stable business
Profitabiltiy ratio
Gross profit=13,000/100,000 = 13%
Net profit margin =900/100,000 = .9%
Slightly lower than industry average
Market ratios are used to find the value of company
Earnings per share = net income/ common stock
= 900/1000 = $.9 per share
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