For the following problems (33-36), use the data from the Narrow Falls Lumber\'s
ID: 2822559 • Letter: F
Question
For the following problems (33-36), use the data from the Narrow Falls Lumber's Income Statement and Balance Sheet.33. Calculate the total debt ratio for
2015:_____________________
34. Calculate the Days' sales in inventory for
2015:_____________________
(hint, you must first calculate the inventory turnover)
35. What is the equity multiplier for 2015?
A. 1.71 B. 1.87 C. 1.44 D. 1.82 E. 1.92
36. What are the values for the three components of the DuPont identity for 2015?
A. 11.08%; .9289; 1.8679 B. 11.08%; 1.0765; 1.8679 C. 11.08%; .9289; .5354 D. 7.75%; 1.0765; .5354 E. 7.75%; 1.0765; 1.8679
Narrow Falls Lumber 2015 Income Statement Net sales Cost of goods sold Depreciation EBIT Interest Taxable income Taxes Net income Dividends $848,600 542,800 147.400 $158,400 12,600 $145,800 51,800 94,000 $28,200 Narrow Falls Lumber Balance Sheets as of December 31, 2014 and 2015 2015 2014 2014 26,900 Accounts payable 78,900$ 79,200 50,00040,000 295,600354,500 2015 Cash $ 32,300 Accounts receivable 74,70072,300 Notes payable 99,50097,800 Long-term debt Common stock and paid-in surplus Net fixed assets 707 100 705,000($1 par value) 170,000175,000 319,100 253 300 Retained earnings Total liabilities & Total assets $913,600 $902,000owners equity $913,600 $902,000
Explanation / Answer
33. Total debt ratio for 2015 = total liabilities/total assets
= (78900+50000+295600)/913600
= 0.46
34. Inventory turnover = cost of goods sold/ inventory = 542800/99500 = 5.46
Days sales in inventory = 365/inventory turnover = 365/5.46
= 66.91
35. Equity multiplier = total assets/total equity = 913600/(170000+319100)
= 1.87 (1.8679)
36. 3 components of DuPont = net profit margin, asset turnover and equity multiplier
Net profit margin = 94000/848600 = 11.08%
Asset turnover = sales/ assets = 848600/ 913600 = 0.9289
Equity multiplier = 1.8679 (as calculated in 35)
Hence the answer is option “A” – 11.08%, 0.9289, 1.8679
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