# Inventory base compared to the utility and fast food

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inventory base compared to the utility and fast-food companies, which resulted in the higer quick ratios for those companies. Net profit margin
Reference C. Why might it be all right for the electric utility to carry a large amount of debt, but not for the software company? Gitman, L.J., & Zutter, C.J. (2015). Principles of Managerial Finance (14 th ed). Pearson: New Jersey.
D. Why wouldn't investors invest all their money in sofeware companies instead of in less profitable companies? (Focus on risk and return).
Liquidity Ratio Josh Smith has compiled some of his personal financial data to determine his liquidity position. The data are as follows. Account Amount Cash \$3,200.00 \$1,000.00 Checking account \$800.00 \$1,200.00 \$900.00 A. Calculate Josh's liquidity ratio. Marketable securities Credit card payables Short-term notes payable
B. Several of Josh's friends have told him that they have liquidity ratios of about 1.8. How would analyze Josh's liquidity relative to his friends? Since Josh's liquidity ratio is 2.38 and higher than his friends' ratios of 1.8, Josh has more liquidity than his friends.
The Relationship Between Finanical Leverage and Profitablity Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow. Use them in a ratio analysis that compares the firms' financial leverage and profitability. Item Pelican Paper Inc. Timberland Forest, Inc. Total Assets 10,000,000 10,000,000 Total Equity 9,000,000 5,000,000 Total Debt 1,000,000 5,000,000 Annual Interest 100,000 500,000 Total Sales 25,000,000 25,000,000 EBIT 6,250,000 6,250,000 3,690,000 3,450,000 A. Calculate the following debt and coverage ratios for the two companies. Discuss their financial risk and ability to cover the cost in relation to each other. 1. Debt Ratio = total liabilities/ total assets Pelican Papers Timberland Forest, Inc. Total Debt/ Total Assets Total Debt/ Total Assets 1,000,000/ 10,000,000 5,000,000/ 10,000,000 Total Debt Ratio= 0.1 10% Total Debt Ratio= 0.5 5% 2. Times Interest Earned Ratio = Earnings before interest and taxes / interest Pelican Papers Timberland Forest, Inc.