Question

Presented below are condensed financial statements adapted from those of two actual companies competing as the primary players in a specialty area of the food manufacturing and distribution Industry ($ in millions, except per share amounts.) Balance Sheets Metropolitan $ 232.3 465.7 519.4 172.6 $ 1,381.6 2,656.2 256.3 $ 4,293.5 Republic $ 42.0 365. 7.4 673.2 533.7 $ 1,621.3 2,348.3 528.6 $ 4,498.1 Assets Cash Accounts receivable (net) Short-term investments Inventory Prepaid expenses and other current assets Current assets Property, plant, and equipment (net) Intangibles and other assets Total assets Liabilities and Shareholders' Equity Accounts payable Short-term notes Accruals and other current liabilities Current liabilities Long-term debt Deferred tax liability Other long-term liabilities Total liabilities Connon stock (par and additional paid-in capital) Retained earnings Less: Treasury stock Total liabilities and shareholders' equity Income Statements Net sales Cost of goods sold Gross profit Operating expenses Interest expense Income before taxes Income tax expense Net income Net income per share $ 530.9 271.1 639.2 $ 1,441.2 594.6 433.6 163.0 $ 2,632.4 195.9 2,526.9 (1.061.7) $ 4,293.5 $ 743.2 680.4 583.5 $ 1,927.1 593.3 658.7 150.1 $ 3,329.2 382.0 1,653.9 (867.0) $ 4,498.1 $ 5,751.0 (2.861.0) $ 2,890.0 (1,692.7) (55.8) $ 1,141.5 (339.7 $ 881.8 $ $ 7,814.2 (4,429.7) $ 3,384.5 (2,484.2) (46.6) $ 853.7 (232.1) 621.6 $ 8.2 Evaluate and compare the two companies by responding to the following questions. Note: Because comparative statements are not provided you should use year-end balances in place of average balances as appropriate Required: 1. For both companies, compute the ratlos below. 2 Evaluate and compare the two companies. Comoloto thir au the below

Answer 1

1)

Particularls	Metropolitan	Republic
Return on Assets	18.67%	13.82%
Profit Margin	13.94%	7.95%

Calculation:

1.Return on Assets=(Net Income* 100)/ Total Assets

Metropolitan = ($801.8 * 100)/ $4,293.5 =18.67%

Republic = $621.6 / $4,498.1 = 13.82%

2.Profit Margin = (Net Income * 100)/ Net Sales

Metropolitan = ($801.8* 100) / $5,751 = 13.94%

Republic = ($621.6*100) / $7,814.2 = 7.95%

2) Metropolitan is earning more Profit Margin and have good Return on Assets as compared to Republic. Whereas Republic is earning more on their equity and interest.