P 5-14Compare two companies in the same industry; Chapters 3 and 5
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 Assets Metropolitan Republic cash $179.3 $37.1 Accounts receivable (net) 422.7 325.0 Short-term investments – 4.7 Inventories 466.4 635.2 Prepaid expenses and other current assets 134.6 476.7 Current assets $1,203.0 $1,478.7
AND So on………………………….
Required:
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.
1. Which of the two firms had greater earnings relative to resources available?
2. Which of the two firms had greater earnings relative to resources available?
3. Which of the two firms had greater earnings relative to resources available?
4. Which of the two firms had greater earnings relative to resources available?
5. Of the two companies, which appears riskier in terms of its ability to pay short-term obligations?
6. How efficiently are current assets managed?
7. From the perspective of a creditor, which company offers the most comfortable margin of safety in terms of its ability to pay fixed interest charges?
