Please answer ALL QUESTIONS, and show ALL WORK. All work includes equations, and how you got each number to plug into the equation. D'LEON INC., PART II4-26 FINANCIAL STATEMENTS AND TAXES Part I of this case, presented in Chapter 3, discussed the situation ofD'Leon Inc., a regional snack foods producer, after an expansion program. D'Leon had increased plant capacityupand undertaken a major marketing campaign in an attempt to "go national." Thus far, sales have not beento the forecasted level, costs have been higher than were projected, and a large loss occurred in 2018 rather thanthe expected profit. As a result, its managers, directors, and investors are concerned about the firm's survival.Donna Jamison was brought in as assistant to Fred Campo, D'Leon's chairman, who had the taskof getting the company back into a sound financial position. D'Leon's 2017 and 2018 balance sheets andincome statements, together with projections for 2019, are given in Tables IC 4.1 and IC 4.2. In addition,Table IC 4.3 gives the company's 2017 and 2018 financial ratios, together with industry average data.The 2019 projected financial statement data represent Jamison's and Campo's best guess for 2019 results,assuming that some new financing is arranged to get the company "over the hump."Jamison examined monthly data for 2018 (not given in the case), and she detected an improving pat-tern during the year. Monthly sales were rising, costs were falling, and large losses in the early months hadturned to a small profit by December. Thus, the annual data look somewhat worse than final monthly data.Also, it appears to be taking longer for the advertising program to get the message out, for the new salesoffices to generate sales, and for the new manufacturing facilities to operate efficiently. In other words, thelags between spending money and deriving benefits were longer than D'Leon's managers had anticipated.For these reasons, Jamison and Campo see hope for the company-provided it can survive in the short run.Jamison must prepare an analysis of where the company is now, what it must do to regain its financialhealth, and what actions should be taken. Your assignment is to help her answer the following questions.Provide clear explanations, not yes or no answers.a. Why are ratios useful? What are the five major categories of ratios?b.Calculate D'Leon's 2019 current and quick ratios based on the projected balance sheet and incomestatement data. What can you say about the company's liquidity positions in 2017, in 2018, and asprojected for 2019? We often think of ratios as being useful (1) to managers to help run the business,(2) to bankers for credit analysis, and (3) to stockholders for stock valuation. Would these differenttypes of analysts have an equal interest in the company's liquidity ratios? Explain your answer. C.d.e.f.g.h.Calculate the 2019 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and totalassets turnover. How does D'Leon's utilization of assets stack up against other firms in the industry?Calculate the 2019 debt-to-capital and times-interest-earned ratios. How does D'Leon compare withthe industry with respect to financial leverage? What can you conclude from these ratios?Calculate the 2019 operating margin, profit margin, basic earning power (BEP), return on assets (ROA),return on equity (ROE), and return on invested capital (ROIC). What can you say about these ratios?Calculate the 2019 price/earnings ratio and market/book ratio. Do these ratios indicate that investorsare expected to have a high or low opinion of the company?Use the DuPont equation to provide a summary and overview of D'Leon's financial condition asprojected for 2019. What are the firm's major strengths and weaknesses?Use the following simplified 2019 balance sheet to show, in general terms, how an improvement inthe DSO would tend to affect the stock price. For example, if the company could improve its collec-tion procedures and thereby lower its DSO from 45.6 days to the 32-day industry average withoutaffecting sales, how would that change "ripple through" the financial statements (shown in thou-sands below) and influence the stock price?Accounts receivableOther current assetsNet fixed assetsTotal assets$ 8781,802817$3,497Current liabilitiesDebtEquityLiabilities plus equity$ 8457001,952$3,497

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Description: Please answer ALL QUESTIONS, and show ALL WORK. All work includes equations, and how you got each number to plug into the equation. D'LEON INC., PART II4-26 FINANCIAL STATEMENTS AND TAXES Part I of this case, presented in Chapter 3, discussed the sit

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Please answer ALL QUESTIONS, and show ALL WORK. All work includes equations, and how you got each number to plug into the equation. D'LEON INC., PART II4-26 FINANCIAL STATEMENTS AND TAXES Part I of this case, presented in Chapter 3, discussed the situation ofD'Leon Inc., a regional snack foods producer, after an expansion program. D'Leon had increased plant capacityupand undertaken a major marketing campaign in an attempt to &#34;go national.&#34; Thus far, sales have not beento the forecasted level, costs have been higher than were projected, and a large loss occurred in 2018 rather thanthe expected profit. As a result, its managers, directors, and investors are concerned about the firm's survival.Donna Jamison was brought in as assistant to Fred Campo, D'Leon's chairman, who had the taskof getting the company back into a sound financial position. D'Leon's 2017 and 2018 balance sheets andincome statements, together with projections for 2019, are given in Tables IC 4.1 and IC 4.2. In addition,Table IC 4.3 gives the company's 2017 and 2018 financial ratios, together with industry average data.The 2019 projected financial statement data represent Jamison's and Campo's best guess for 2019 results,assuming that some new financing is arranged to get the company &#34;over the hump.&#34;Jamison examined monthly data for 2018 (not given in the case), and she detected an improving pat-tern during the year. Monthly sales were rising, costs were falling, and large losses in the early months hadturned to a small profit by December. Thus, the annual data look somewhat worse than final monthly data.Also, it appears to be taking longer for the advertising program to get the message out, for the new salesoffices to generate sales, and for the new manufacturing facilities to operate efficiently. In other words, thelags between spending money and deriving benefits were longer than D'Leon's managers had anticipated.For these reasons, Jamison and Campo see hope for the company-provided it can survive in the short run.Jamison must prepare an analysis of where the company is now, what it must do to regain its financialhealth, and what actions should be taken. Your assignment is to help her answer the following questions.Provide clear explanations, not yes or no answers.a. Why are ratios useful? What are the five major categories of ratios?b.Calculate D'Leon's 2019 current and quick ratios based on the projected balance sheet and incomestatement data. What can you say about the company's liquidity positions in 2017, in 2018, and asprojected for 2019? We often think of ratios as being useful (1) to managers to help run the business,(2) to bankers for credit analysis, and (3) to stockholders for stock valuation. Would these differenttypes of analysts have an equal interest in the company's liquidity ratios? Explain your answer. C.d.e.f.g.h.Calculate the 2019 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and totalassets turnover. How does D'Leon's utilization of assets stack up against other firms in the industry?Calculate the 2019 debt-to-capital and times-interest-earned ratios. How does D'Leon compare withthe industry with respect to financial leverage? What can you conclude from these ratios?Calculate the 2019 operating margin, profit margin, basic earning power (BEP), return on assets (ROA),return on equity (ROE), and return on invested capital (ROIC). What can you say about these ratios?Calculate the 2019 price/earnings ratio and market/book ratio. Do these ratios indicate that investorsare expected to have a high or low opinion of the company?Use the DuPont equation to provide a summary and overview of D'Leon's financial condition asprojected for 2019. What are the firm's major strengths and weaknesses?Use the following simplified 2019 balance sheet to show, in general terms, how an improvement inthe DSO would tend to affect the stock price. For example, if the company could improve its collec-tion procedures and thereby lower its DSO from 45.6 days to the 32-day industry average withoutaffecting sales, how would that change &#34;ripple through&#34; the financial statements (shown in thou-sands below) and influence the stock price?Accounts receivableOther current assetsNet fixed assetsTotal assets$ 8781,802817$3,497Current liabilitiesDebtEquityLiabilities plus equity$ 8457001,952$3,497

Accepted Answer

Ratio analysis is a method used to evaluate the financial performance and health of a company. It…