Please answer the question below according to the information given in the attachment:
a) Using the information provided for 31 Dec 2005, calculate the
following: net working capital, current ratio, quick ratio, inventory
turnover, average collection period, total debt ratio, gross profit margin,
net profit margin, return on total assets, return on equity.
b) Evaluate the company’s performance against industry average ratios
and compare with last year’s results.
Extracted text: Alpha Milk Corp is considering taking over their competitor, Dana Dairy Products, and asked your consultancy firm to perform financial statement analysis to assess feasibility of this strategic initiative. You are given the following key financial ratios, the firm's income statement and the balance sheet. You can assume that there are 365 days in a year. Dana Dairy Products Key Ratios Industry Average 1.3 Actual Actual 2004 2005 Current Ratio 1.0 Quick Ratio 0.8 0.75 30 days Average collection Period 23 days Inventory Turnover Debt Ratio 21.7 19 64.7% 50% Times Interest Earned 4.8 5.5 Gross Profit Margin Net Profit Margin 13.6% 12.0% 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, 2005 $100,000 87,000 $13,000 11,000 $2,000 Sales Revenue Less: Cost of Goods Sold Gross Profits Less: Operating Expenses Operating Profits Less: Interest Expense Net Profits Before Taxes 500 $1,500 600 $900 Less: Taxes (40%) Net Profits After Taxes
Extracted text: Balance Sheet Dana Dairy Products December 31, 2005 Assets Cash $ 1,000 Accounts Receivable 8,900 Inventories 4,350 $14,250 Total Current Assets Gross Fixed Assets $35,000 Less: Accumulated Depreciation Net Fixed Assets 13,250 21,750 $36,000 Total Assets Liabilities & Stockholders' Equity Accounts Payable Accruals $ 9,000 6,675 $15,675 4,125 $19,800 1,000 15,200 $16,200 $36,000 Total Current Liabilities Long-term Debt Total Liabilities Common Stock Retained Earnings Total Stockholders' Equity Total Liabilities & Stockholders Equity