INTEGRATED CASE D'LEON INC., PARTII 4-26 D TAXES Part I of this case, presented in Chapter 3, discussed the D'Leon had increased plant FINANCIAL STATEMENTS AN si D'Leon Inc., a regional snack foods prod ucer, after an expansion program. r marketing campaign in an attempt to "go national." Thus far, sales have no rather and un to the forecasted level, costs have been higher than were projected, and a large loss occurred in 2018 rath th e expected profit. As a result, its managers, directors, and investors are concerned about the firm urvival Donna Jamison was brought in as assistant to Fred Campo, D'Leon's chairman, who had the tasl. of getting the company back into a sound financial position. D'Leon's 2017 and 2018 balan income statements, together with projections for 2019 and are given in Tables IC 4.1 and IC 4.2. In addi 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 result 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 improvin tern during the year. Monthly sales were rising, costs were falling, and large losses in the early months had turned to a smal 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 sales offices to generate sales, and for the new manufacturing facilities to operate efficiently. In other words,the lags 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 financial health, and what actions should be taken. Your assignment is to help her answer the following questions Provide clear explanations, not yes or no answers. Why are ratios useful? What are the five major categories of ratio Calculate D'Leon's 2019 current and quick ratios based on the projected balance sheet and income b. statement data. What can you say about the company's liquidity positions in 2017, in 2018, and as rojected 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 different types of analysts have an equal interest in the company's liquidity ratios? Explain your answer. 37141 302 50 60-90-93- 22 73 6 9 3. 9, es 198-0.5 3 0,0 2.5 2.5 2 46 34 dai 46 ,6 7 662 an 20020002 22| 44314 ,7 9 0 nt sa To Li A A N Part 2 7,035,600 6,034,000 LE IC 4.2 s609608( 13,988) $ 190428 $ 40,000 fund payments Note: E indicates estimated. The 2019 data are forecasts. The firm had sufficient taxable income in 2016 and 2017 to obtain its full tax refund in 2018 2017 Industry Average 2019E Days sales outstanding (DSO Debt-to-capital ratio Operating margin power -32.5% Book value per share Note: E indicates estimated. The 2019 data are forecasts Calculation is based on a 365-day year