Question

1. Pick two publicly traded companies in the same industry.

2. Calculate the ratios from your textbook or any other ratios you deem necessary for each company for two years. Some examples are working capital, current ratio, current cash debt coverage ratio, inventory turnover ratio, days in inventory, receivables turnover ratio, average collection period, debt to asset ratio, cash debt coverage ratio, times interest earned ratio, free cash flow, earnings per share, price earnings ratio, gross profit rate, profit margin ratio, return on assets, return on equity, payout ratio, asset turnover ratio

3. Write a analysis on which company you would buy stock in and why. Be sure to use all the ratios calculated in item 2 in your analysis if not other ratios.

4. Turn in ratios, financial statements, and paper

Sales Cost of goods sold Gross profit Selling expenses Administrative expenses Total operating expenses Income from operations Other revenue and expense: Other revenue Other expense interest) Income before income tax Income tax expense Net income Mooney Company 100.0% (69.6) 30.4% (12.8)% (6.9) (19.7)% 10.7% Lowell Corporation 100.0% (70.0) 30.0% (11.5)% (4.1) (15.6)% 14.4% 0.6 (0.4) 10.9% (4.8) 0.6 (0.5) 14.5% (5.5) 9.0% 6.1%

Answer 1

Abbreviation:- Mooney Company : M Co

                           Wendt Cor               :     W Co

In Given Question we are required to analysis the companies based on their ratio and we need to Suggested a company which is better.

First and Foremost Start with Current Ratio of Both Company which is same i.e. 2.6 so now further analysing same in details we will have to reach at conclusion.

We will Now Focus on Quick Ratio of Company i.e. Quick Ratio only Consider Highly Liquid Assets of Company Only i. e. It will not Consider Stock and Prepaid Expenses

Quick Ratio = Current Assets – ( Stock + Prepaid Expenses)/ Current Liabilities

M Co                     =             550000-(264000+5500)/210000 = 1.34 times

W Co                     =             550000-(380000+9500)/210000   =             0.76 Times

From above we can say that liquidity condition of M Co is better as it has more amount invested in Liquid Assets.

Other Aspects :-

Gross Profit Ratio of M Co is better than W Co as COGS of M Co. is comparatively less than W Co. which shows that M Co. has better operating Condition.

Given Increased Demand and Considering Other Expense as Fixed M Co will be in position to earn better as its COGS is less I .e. higher Production higher will be the profits

Other Expense such as S & D and Admin expenses of Mco is higher but considering it will benefit company in long horizon it not considered in decision making about which company is to be selected.

Considering all above aspects we arrive at conclusion that M Co Has better financial prospects compare with W Co.