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 Republic $ 232.3 465.7 510.4 172.6 $ 1,381.6 2,656.2 256.3 $ 4,293.5 $ 42.8 365.6 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 $ 743.2 600.4 583.5 $ 1,927.1 593.3 658.7 150.1 $ 3,329.2 382.0 1,653.9 (867.8) $ 4,498.1 $ 5,751.0 (2,861.0) $ 2,890. (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 ratios below. 2 Evaluate and compare the two companies. Complete this question by entering your answers in the tabs below. Required 1 Required 2

Answer 1

The ratios will be:

RATIO Return on Assets Profit Margin Asset Turnover Return on Equity Equity Multiplier Acid Test Ratio Current Ratio Receivables Turnover Inventory Turnover Times Interest Earned METROPOLITON REPUBLIC 18.67% 13.82% 13.94% 7.95% 1.34 1.74 48.27% 21.41% 2.58 1.55 0.48 0.22 0.96 0.84 12.35 21.41 6.58 5.61 21.46 23.61

Workings

The formula and workings for ratio are as follows

RATIO Return on Assets Profit Margin Asset Turnover Return on Equity Equity Multiplier Acid Test Ratio Current Ratio Receivables Turnover Inventory Turnover Times Interest Earned FORMULA Net Income/Total Assets Net Income Net Revenues Net Revenues/Total Assets Net Income Total Equity Total Assets/Stockholders Equity (cash+st inv. + ar/current liabilities Current Assets / Current Liabilities Net Revenues/Accounts Receivables COGS/Inventory Earning before interest & tax/Interest Income METROPOLITON Workings 18.67% =801.8/4293.5 13.94% =801.8/5751 1.34 =5751/4293.5 48.27% =801.8/(195.9+2526.9-1061.7) 2.58 =4293.5/(195.9+2526.9-1061.7) 0.48 =(232.3+465.7+0/1441.2 0.96 =1381/1441.2 12.35 =5751/465.7 5.61 =2861/510.4 21.46 =(2890-1692.7)/55.8 REPUBLIC Workings 13.82% =621.6/4498.1 7.95% =621.6/7814.2 1.74 =7814.2/4498.1 21.41% =621.6/(382+1653.9+867) 1.55 =4498.1/(382+1653.9+867) 0.22 =(42+365+7.4)/1927.1 0.84 =1621.3/1927.1 21.41 =7814.2/365 6.58 =4429.77673.2 23.61 =(3384.5-2284.27/46.6

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