QUESTION THREE (20 MARKS)

1. You have been hired as an analyst for Mellon Bank and your team is working on an independent assessment of Daffy Duck Food Inc. (DDF Inc.) DDF Inc. is a firm that specializes in the production of freshly imported farm products from France. Your assistant has provided you with the following data for Flipper Inc and their industry.

Ratio	2019	2018	2017	2019- Industry Average
Long-term debt	0.45	0.40	0.35	0.35
Inventory Turnover	62.65	42.42	32.25	53.25
Depreciation/Total Assets	0.25	0.014	0.018	0.015
Days sales in receivables	113	98	94	130.25
Debt to Equity	0.75	0.85	0.90	0.88
Profit Margin	0.082	0.07	0.06	0.075
Total Asset Turnover	0.54	0.65	0.70	0.40
Quick Ratio	1.028	1.03	1.029	1.031
Current Ratio	1.33	1.21	1.15	1.25
Times Interest Earned	0.9	4.375	4.45	4.65
Equity Multiplier	1.75	1.85	1.90	1.88

1. In the annual report to the shareholders, the CEO of Flipper Inc wrote, 2017 was a good year for the firm with respect to our ability to meet our short-term obligations. We had higher liquidity largely due to an increase in highly liquid current assets (cash, account receivables and short-term marketable securities). Is the CEO correct? Explain and use only relevant information in your analysis. (3 marks)
2. The CEO has also stated that the efficiency of the company is wanting has asked departmental heads to explain. Do you agree with this statement? Give reasons using appropriate ratios (3 marks)

3. What can you say about the firm's asset management? Be as complete as possible given the above information, but do not use any irrelevant information. (3 marks)

4. You are asked to provide the shareholders with an assessment of the firm's solvency and leverage. Be as complete as possible given the above information, but do not use any irrelevant information. (3 marks)