FINE2000Midterm1 - Question 1 Ratios a The table below...

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Question 1 Ratios: a) The table below presents selected ratios for two firms. One firm is in the transportation industry, while the other is in the food industry. The transportation firm owns and operates railways, and also operates a trucking division. The firm in the food industry is a major food distributor, as well as a leading provider of drugstore, general merchandise and financial products and services. FIRM A FIRM B Current Ratio 0.71 0.03 Inventory Turnover 9.61 12.00 Collection Period (days) 34.44 4.86 Total Debt / Total Assets 0.34 0.37 Long-term debt / Equity 1.01 0.91 Revenues / Total Assets 0.37 1.79 Net Income / Revenues 0.11 0.02 Net Income / Equity 0.04 0.13 Cash and Marketable Securities (% of Total assets) 0% 10% PPE (% of Total assets) 92% 50% Accounts Payable (% of Total assets) 8% 21% Identify the two firms and provide four different reasons that motivate your choice (briefly explain by making explicit reference to the respective business models). b) Assume that Firm A’s NOPAT is 18.68% of its revenues. What is Firm A’s ROA for that year?

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