Balance Sheet
Dana Dairy Products
December 31, 2019
15) The current ratio for Dana Dairy Products in 2019 was ________. (See Table 3.2)
A) 1.58
B) 0.63
C) 1.10
D) 0.91
16) Since 2018, the liquidity of Dana Dairy Products ________. (See Table 3.2)
A) has deteriorated
B) has remained the same
C) has improved
D) is not determinable
17) The net working capital for Dana Dairy Products in 2019 was ________. (See Table 3.2)
A) $10,325
B) -$10,325
C) -$1,425
D) $14,250
18) The inventory turnover for Dana Dairy Products in 2019 was ________. (See Table 3.2)
A) 43
B) 5
C) 20
D) 25
19) The inventory management at Dana Dairy Products ________ since 2018. (See Table 3.2)
A) has deteriorated
B) has remained the same
C) has improved slightly
D) cannot be determined
20) The average collection period for Dana Dairy Products in 2019 was ________. (See Table 3.2)
A) 32.5 days
B) 11.8 days
C) 25.3 days
D) 35.9 days
21) If Dana Dairy Products has credit terms which specify that accounts receivable should be paid in 25
days, the average collection period ________ since 2018. (See Table 3.2)
A) has deteriorated
B) has remained the same
C) has improved
D) cannot be determined
22) Dana Dairy Products had a ________ degree of financial leverage than the industry standard,
resulting in ________. (See Table 3.2)
A) lower; lower return on total assets
B) lower; lower return on equity
C) higher; higher return on equity
D) higher; higher return on total assets
23) The debt ratio for Dana Dairy Products in 2019 was ________. (See Table 3.2)
A) 50 percent
B) 11 percent
C) 55 percent
D) 44 percent
24) Dana Dairy Products’ gross profit margin was inferior to the industry standard. This may have
resulted from ________. (See Table 3.2)
A) a high sales price
B) the high cost of goods sold
C) excessive selling and administrative expenses
D) excessive interest expense
25) The gross profit margin and net profit margin for Dana Dairy Products in 2019 were ________. (See
Table 3.2)
A) 13 percent and 0.9 percent, respectively
B) 13 percent and 1.5 percent, respectively
C) 2 percent and 0.9 percent, respectively
D) 2 percent and 1.5 percent, respectively
26) The return on total assets for Dana Dairy Products for 2019 was ________. (See Table 3.2)
A) 0.9 percent
B) 5.5 percent
C) 25 percent
D) 2.5 percent
27) The return on equity for Dana Dairy Products for 2019 was ________. (See Table 3.2)
A) 0.6 percent
B) 5.6 percent
C) 0.9 percent
D) 50 percent
28) Using the modified DuPont formula allows the analyst to break Dana Dairy Products return on equity
into 3 components: the net profit margin, the total asset turnover, and a measure of leverage (the financial
leverage multiplier). Which of the following mathematical expressions represents the modified DuPont
formula relative to Dana Dairy Products’ 2019 performance? (See Table 3.2)
A) 5.6(ROE) = 2.5(ROA) × 2.22(Financial leverage multiplier)
B) 5.6(ROE) = 3.3(ROA) × 1.70(Financial leverage multiplier)
C) 4.0(ROE) = 2.5(ROA) × 2.00(Financial leverage multiplier)
D) 2.5(ROE) = 5.6(ROA) × 2.22(Financial leverage multiplier)
29) As the financial leverage multiplier increases, this may result in ________.
A) an increase in the net profit margin and return on investment, due to the decrease in interest expense
as debt decreases
B) an increase in the net profit margin and return on investment, due to the increase in interest expense as
debt increases
C) a decrease in the net profit margin and return on investment, due to the increase in interest expense as
debt increases
D) a decrease in the net profit margin and return on investment, due to the decrease in interest expense as
debt decreases
30) In an effort to analyze Clockwork Company finances, Jim realized that he was missing the company’s
net profits after taxes for the current year. Find the company‘s net profits after taxes using the following
information.
Return on total assets = 2%
Total asset turnover = 0.5
Cost of goods sold = $105,000
Gross profit margin = 0.30
60
31) Given the following balance sheet, income statement, historical ratios and industry averages, calculate
the Pulp, Paper, and Paperboard, Inc. financial ratios for the most recent year. Analyze its overall
financial situation for the most recent year. Analyze its overall financial situation from both a cross–
sectional and time-series viewpoint. Break your analysis into an evaluation of the firm’s liquidity, activity,
debt, and profitability.
Income Statement
Pulp, Paper, and Paperboard, Inc.
For the Year Ended December 31, 2019
Balance Sheet
Pulp, Paper, and Paperboard, Inc.
December 31, 2019
61
Historical and Industry Average Ratios
Pulp, Paper and Paperboard, Inc.
63
32) Complete the balance sheet for General Aviation, Inc. based on the following financial data.
Balance Sheet
General Aviation, Inc.
December 31, 2019
Key Financial Data (2019)
1. Sales totaled $720,000.
2. The gross profit margin was 38.7 percent.
3. Inventory turned 6 times.
4. There are 360 days in a year.
5. The average collection period was 31 days.
6. The current ratio was 2.35.
7. The total asset turnover was 2.81.
8. The debt ratio was 49.4 percent.
9. Total current assets equal $159,565.
33) Construct the DuPont system of analysis using the following financial data for Key Wahl Industries
and determine which areas of the firm need further analysis.
Key Financial Data
Table 3.1
Information (2019 values)
1. Sales totaled $110,000
2. The gross profit margin was 25 percent.
3. Inventory turnover was 3.0.
4. There are 360 days in the year.
5. The average collection period was 65 days.
6. The current ratio was 2.40.
7. The total asset turnover was 1.13.
8. The debt ratio was 53.8 percent.
34) Inventory for CEE in 2019 was ________. (See Table 3.1)
A) $36,667
B) $32,448
C) $27,500
D) $9,167
35) Notes payable for CEE in 2019 was ________. (See Table 3.1)
A) $113,466
B) $52,372
C) $41,372
D) $10,609
36) Accounts receivable for CEE in 2019 was ________. (See Table 3.1)
A) $14,056
B) $19,861
C) $14,895
D) $18,333
37) Net fixed assets for CEE in 2019 were ________. (See Table 3.1)
A) $45,484
B) $48,975
C) $54,511
D) $69,341
38) Total assets for CEE in 2019 were ________. (See Table 3.1)
A) $45,895
B) $124,300
C) $ 58,603
D) $97,345
39) Long-term debt for CEE in 2019 was ________. (See Table 3.1)
A) $30,763
B) $52,372
C) $10,608
D) $41,372