Question

Actual 2019 Dana Dairy Products Key Ratios Industry Actual Average 2018 Current ratio 1.3 1.0 Quick ratio 0.8 0.75 Average collection period 23 days 30 days Inventory turnover 21.7 Debt ratio 64.7% Times interest eamed 4.8 5.5 Gross profit margin 13.6% 12.0% Net profit margin 1.0% 0.5% Return on total assets 2.9% 20% Retum on equity 8.2% 4.0% 19 50% Income Statement Dana Dairy Products For the Year Ended December 31, 2019 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%) Net profits after taxes 600 900 Balance Sheet Dana Dairy Products December 31, 2019 Assets Cash Accounts receivable Inventories Total current assets Gross fixed assets $35,000 Less: Accumulated depreciation 13,250 Net fixed assets Total assets $1,000 8,900 4,350 $14,250 21,750 $36,000 Liabilities & Stockholders' Equity Accounts payable Accruals Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities & stockholders equity $ 9,000 6.675 $15,675 4 125 $19,800 1,000 15, 200 $16,200 $36,000 The current ratio for Dana Dairy Products in 2019 was (See Table 3.2) O A. 1.58 OB. 1.10 OC. 0.63 OD. 0.91

Answer 1

Current assets = $14,250

Current liabilities = $15,675

Current ratio for dairy product in 2019 = Current assets/Current liabilities

= 14,250/15,675

= 0.91

fourth option is the correct option

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