Question

compare and contrast these two companies and recommend and with which to form a merger

analyse the following ratios for these two companies

		Fashion Forward	Dreams Design
	Profitability Measures
1	Profit margin	5.46%	3.9%
2	Return on assets	4.9%	4.8%
	Short-Term Liquidity Measures
3	Credit Ratios	1.1 of 1	1.4 of 1
4	Quick Ratio	0.98 of 1	1.01 of 1
5	AR TurnOver Ratio	14.3 times	20.6times
6	Average Collection Period	26 days	18 days
7	Inventory Turn over	12.9 times	15.7 times
8	Average Sales	28 Days	23 Days
	Long-Term Solvency Measures
9	Debt to Equity Ratio	0.95 to 1	0.77 to 1

Answer 1

Sl. No.	Ratios	Fashion Forward	Dreams Design	Remarks
1	Profit Margin	5.46%	3.9%	Ratio of FF is higher which means FF has better profit margin
2	Return on assets	4.9%	4.8%	Ratio of FF is slightly higher which means FF is better at converting its investment into profits.
3	Credit Ratios	1.1 of 1	1.4 of 1	Ratios of DD is higher which means that DD is in a better position in meeting short-term liabilities with short-term assets.
4	Quick Ratio	0.98 of 1	1.01 of 1	Ratios of DD is higher which means that DD has most readily available current assets to pay off short-term obligations.
5	AR TurnOver Ratio	14.3 times	20.6 times	Ratios of DD is higher which means that DD is aggressive in collection of money.
6	Average Collection Period	26 days	18 days	Ratios of DD is lower which means that DD takes lesser time in converting its credit sales into cash
7	Inventory Turn over	12.9 times	15.7 times	Ratio of DD is higher which means that DD is very efficient in managing its inventories
8	Average Sales	28 Days	23 Days	Ratios of DD is lower which means that DD is very efficient in sales collection activities (trade receivables)
9	Debt to Equity Ratio	0.95 to 1	0.77 to 1	Ratios of DD is lower which means that DD has less risk due to low debt to equity
Note:	From the above analysis it can be concluded that Dreams Design is more efficient in managing its
	business only little bit of thrust is need in lowering its cost of goods sold and improving its sales otherwise in all areas the unit is in
	favorable position. Hence recommended to form merger.