Sweet Dreams Corp. has prepared the following financial statements:

Sweet Dreams Corp.				Sweet Dreams Corp.
Income Statement				Balance Sheet
For the Year Ended Dec. 31 2020				As of Dec. 31 2020
	2020	2019		Assets	2020	2019
Sales	3,074,000	2,567,000		Cash	431,000	339,000
Cost of Goods Sold	2,088,000	1,711,000		Accounts Receivable	503,000	365,000
Gross Profit	986,000	856,000		Inventories	289,000	300,000
Selling and G&A Expenses	294,000	295,000		Total Current Assets	1,223,000	1,004,000
Fixed Expenses	35,000	35,000		Gross Fixed Assets	4,669,000	4,322,000
Depreciation Expense	239,000	223,000		Accumulated Depreciation	2,295,000	2,056,000
EBIT	418,000	303,000		Net Fixed Assets	2,374,000	2,266,000
Interest Expense	93,000	91,000		Total Assets	3,597,000	3,270,000
Earnings Before Taxes	325,000	212,000		Liabilities and Owners' Equity
Taxes	94,000	64,000		Accounts Payable	382,000	270,000
Net Income	231,000	148,000		Short-term Notes Payable	79,000	99,000
				Accrued Expenses	159,000	114,000
				Total Current Liabilities	620,000	483,000
				Long-term Debt	1,023,000	967,000
				Total Liabilities	1,643,000	1,450,000
				Common Stock	819,000	808,000
				Retained Earnings	1,135,000	1,012,000
				Total Shareholder's Equity	1,954,000	1,820,000
				Total Liabilities and Owners' Equity	3,597,000	3,270,000

1. Using the following 2020 industry averages, evaluate Sweet Dreams Corp.s financial situation.

Set up a ratio analysis as shown in Exhibit 3-7 (Identify and Access Needed Information 4 pts).

Ratio	Value	Ratio	Value
Current Ratio	2.50x	Debt to Equity	0.90x
Quick Ratio	0.60x	Long-Term Debt to Equity	40.00%
Inventory Turnover Ratio	6.50x	Times Interest Earned	2.50x
Accounts Receivable Turnover Ratio	8.00x	Cash Coverage Ratio	3.50x
Average Collection Period	40.00 days	Gross Profit Margin	20.00%
Fixed Asset Turnover	2.00x	Operating Profit Margin	7.00%
Total Asset Turnover	2.00x	Net Profit Margin	5.00%
Total Debt Ratio	50.00%	Return on Total Assets	5.00%
Long-Term Debt Ratio	20.00%	Return on Equity	8.00%
LTD to Total Capitalization	30.00%	Return on Common Equity	10.00%

2. Verify Sweet Dreams Corps ROE using the Du Pont method (Analysis 4 pts).
3. Using the Altmans model for privately held firms and public ones, calculate the Z-score for Sweet Dreams Corp. Assume that the market value of Sweet Dreams Corp. is $1,200,000. (Identify and Access Needed Information 4 pts).
4. Calculate Sweet Dreams Corp.s economic profit for these years and compare it to net income. Assume that the weighted average cost of capital is 12% (Identify and Access Needed Information 4 pts).
5. Interpretation: please describe where you obtained information to develop analyses and interpret the results. Please include your written description in the interpretation tab. If you do not complete this section with your words or leave the interpretation tab as a blank, you receive 0 point in this HW.
   1. Complete individual interpretation for each ratio.
   2. Describe your analysis, and elaborate your results in relation to ratios, Do Pont ROE, Z-score and

Economic Profit.