Question

	The   financial statements of Dandy Distributors Ltd.  are shown on the "Fcl. Stmts."   page.
	Required:
1	Based on   Dandy's financial statements, calculate ratios for the year ended December   31, 2020. Assume all sales are on credit. Show your work.
2	From these ratios,   analyze the financial performance of Dandy.

Dandy Distributors Ltd.
Income Statement
For the Year Ended December 31, 2020
								2020		2019
Sales,   net								$21,133,000		$19,442,360
Less: Cost of goods sold								16,061,080		14,970,617
	Gross profit							5,071,920		4,471,743
Operating   expenses
	Selling
		Salaries and benefits						841,000		832,590
		Delivery						104,400		95,004
		Office supplies						153,600		152,064
		Warranty						422,660		431,113
			Total selling					1,521,660		1,510,771
	General and   administrative
		Bad debts						633,990		646,670
		Depreciation						1,176,660		1,200,193
		Professional fees						168,900		157,077
			Total general and   adminstrative					1,979,550		2,003,940
Total   operating expenses								3,501,210		3,514,711
Income   (loss) from operations								1,570,710		957,032
Other   income (expenses)
	Rent revenue							187,000		200,090
Income   (loss) before interest and income taxes								1,757,710		1,157,122
	Interest expense							682,245		668,600
Income   (loss) before income taxes								1,075,465		488,521
	Income taxes (recovered)							247,357		112,360
Net   income (loss)								$828,108		$376,162
Dandy Distributors Ltd.
Statement of   Changes in Equity
For the Year Ended   December 31, 2020
				2020								2019
								Retained earnings   (deficit)		Total   equity		Total   equity
				Common stock		Pref. stock
Balance   (deficit) at Jan. 1				$652,000		$19,670		$5,353,112		$6,024,782		$5,730,250
Stock   issued				27,400						27,400
Net   income (loss)								828,108		828,108		376,162
Cash   dividends declared
	Preferred							(39,300)		(39,300)		(43,230)
	Common							(38,400)		(38,400)		(38,400)
Balance   (deficit) at Dec. 31				$679,400		$19,670		$6,103,520		$6,802,590		$6,024,782
	Dandy Distributors   Ltd.
	Balance Sheet
	At December 31, 2020
	Assets
	Current							2020		2019
		Cash						$63,000		$20,540
		Accounts receivable, net						4,020,000		4,221,000
		Inventories						2,420,000		2,468,400
								6,503,000		6,709,940
	Plant assets
		Land						8,624,000		8,541,260
		Building, net						6,537,000		6,929,220
		Patents, net						27,300		27,300
		Goodwill						25,600		25,600
								15,213,900		15,523,380
								$21,716,900		$22,233,320
	Liabilities
	Current
		Trade accounts payable						$698,000		$642,160
		Estimated current   liabilities						117,600		110,544
		Estimated warranty   liabilities						194,000		209,520
		Note payable						24,200
		Dividends payable						77,700		81,630
		Interest payable						14,300		14,157
		Salaries and benefits   payable						90,000		89,100
		Sales tax payable						23,000		23,920
		Unearned rent						19,500		16,674
		Current portion of   mortgage payable						2,237,764		1,621,014
		Corporate income taxes   payable						11,110		11,443
								3,507,174		2,820,163
	Non-current
		Mortgage payable						13,644,900		15,009,390
		Less:   Current portion						(2,237,764)		(1,621,014)
								11,407,136		13,388,376
			Total liabilities					14,914,310		16,208,538
	Stockholders' Equity
	Common stock, $1 per   share							679,400		652,000
	Preferred stock, $10 per   share							19,670		19,670
	Retained earnings   (deficit)							6,103,520		5,353,112
								6,802,590		6,024,782
		Total liabilities and S/H   equity						$21,716,900		$22,233,320
			6,103,520

	Dandy Distributors   Ltd.
	Selected Financial   Ratios
			2020 industry average
					Dandy's ratios
					2020		2019		2018
	a.	Current ratio	1.9				2.4		2.7
	b.	Acid-test ratio	1.2				1.5		1.7
	c.	Accounts rec. collection (days)	70				79		94
	d.	Days of sales in inventory	52				60		67
	e.	Revenue operating cycle (days)	122				139		167
	f.	Gross profit ratio	25.7%				23.0%		22.8%
	g.	Operating profit ratio	8.2%				4.9%		4.3%
	h.	Net profit ratio	4.3%				1.9%		1.6%
	i.	Sales to total assets ratio	1.0				0.9		0.7
	j.	Return on total assets ratio	7.8%				4.2%		3.4%
	k.	Return on s/h equity ratio	14.2%				6.4%		5.2%
	l.	Debt to s/h equity ratio	4.1				2.7		3.0
	m.	Times interest earned	2.4				1.4		1.2
	n.	Earnings (loss) per common share	$1.72				$0.51		$0.43
	o.	Price-earnings ratio (given)	28		23		15		12
	p.	Dividend yield per   common share (given)
			5%		5%		5%		6%

Answer 1