Calculate the 2019 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. How does D'Leon's utilization of assets stack up against other firms in the industry? Calculate the 2019 debt-tocapital and times-interest-earned ratios. How does D'Leon compare with the 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 ratioi Do these ratios indicate that investors are 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 as projected 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 in the D50 would tend to affect the stock price For example, if the company could improve its collec- tion procedures and thereby lower its DSO from 4516 days to the 32-day industry average without affecting sales, how would that change "ripple through\" the financial statements (shown in thou- sands below) and inuence the stock price? Accounts receivable S 878 Current liabilities S 845 Other current assets 1,802 Debt 700 Net xed assets 817 Equity E Total assets 5 97 Liabilities plus equity 5397 Does it appear that inventories could be adjusted? If so, how should that adjustment affect D'Leon's profitability and stock price? In 2018, the company paid its suppliers much later than the due dates; also, it was not maintaining financial ratios at levels called for in its bank loan agreements, Therefore, suppliers could cut the com- pany off, and its bank could refuse to renew the loan when it comes due in 90 days On the basis of data provided, would you, as a credit manager, continue to sell to D'Leon on credit? (You could demand cash on deliverythat is, sell on terms of CODbut that might cause D'Leon to stop buying from your company) Similarly, if you were the bank loan officer, would you recommend renewing the loan or demanding its repayment? Would your actions be inuenced if, in early 2019, D'Leon showed you its 2019 projections along with proof that it was going to raise more than $1.2 million of new equity? In hindsight, what should D'Leon have done in 2017? What are some potential problems and limitations of financial ratio analysis? What are some qualitative factors that analysts should consider when evaluating a company's likely future financial perforrmnce? Balance Sheets TABLE IC 4.1 201 DE 201 8 201 7 Assets Cash 5 85,632 5 7,282 5 57,600 Accounts receivable 878,000 632,160 351,200 Inventories 1,716,480 1,287,360 715,200 Total current assets $2,680,112 $1,926,802 S 1,124,000 Gross xed assets 1,197,160 1,202,950 491,000 Less accumulated depreciation 380,120 263,160 146,200 Net xed assets 5 817,040 5 939,790 5 344,800 Total assets $3,497,152 $2,866,592 3 1,468,800 Liabilities and Equity Accounts payable 5 436,800 5 524,160 5 145,600 Accruals 408,000 489,600 136,000 Notes payable 300,000 636,808 200,000 Total current liabilities $1,144,800 $1,650,568 5 481,600 Long-term debt 400,000 723,432 323,432 Common stock 1,721,176 460,000 460,000 Retained earnings 231,176 32,592 203,768 Total equity $1,952,352 5 492,592 5 663,768 Total liabilities and equity $3,497,152 $2,866,592 5 1,468,800 Note: E indicates estimated.The 2019 data are forecasts TABLE I( 4.2 TABLE I( 4.3 Income Statements 2019E 2018 201 7 Sales 57,035,600 $ 6,034,000 5 3,432,000 Cost of goods sold 5,875,992 5,528,000 2,864,000 Other expenses 550,000 519,988 358,672 Total operating costs excluding depreciation and amortization $6,425,992 5 6,047,988 $ 3,222,672 EBITDA m m m Depreciation and amortization 116,960 116,960 18,900 EBIT 5 492,648 (5 130,948) $ 190,428 Interest expense 70,008 136,012 43,828 EBT S 422,640 (S 266,960) 5 146,600 Taxes (40%) 169,056 (106,784)8 58,640 Net income 5 2 84 6) 0 EP5 $ 1.014 (5 1.602) 5 0.880 DPS $ 0.220 $ 0.110 5 0220 Book value per share 5 7.809 5 4.926 5 6.638 Stock price 5 12.17 S 2.25 5 8.50 Shares outstanding 250,000 100,000 100,000 Tax rate 40.00% 40.00% 40.00% Lease payments $40,000 5 40,000 5 40,000 Sinking fund payments 0 0 0 Note: E indicates estimated. The 2019 data are forecasts. iThe rm had sufficient taxable income in 2016 and 2017 to obtain its full tax refund in 2018. Ratio Analysis 2019E 2018 201 7 Industry Average Current 1.2x 2.3x 2.7>