Condensed financial statements for ABC Corp. and XYZ Corp. for 2016 follow:

INSTRUCTIONS
1. Compute the following ratios for each company:
a. Rate of return on net sales
b. Rate of return on total assets at end of year
c. Rate of return on stockholders' equity at end of year
d. Earnings per share of common stock
e. Ratio of stockholders' equity to total equities
f. Current ratio
g. Asset turnover
h. Book value per share of common stock
2. Comment on the similarities and differences in the ratios computed for the two companies, pointing out the major factor that causes differences.
3. In which corporation would stock ownership be riskier? Explain.

4. Would you consider the extension of short-term credit to ABC Corp. or XYZ Corp. riskier? Explain.

Analyze:
What percentage of net sales was expended for operating expenses by ABC Corp.? By XYZ Corp.?

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Income Statements Year Ended December 31, 2016 ABC Co 2 5 0 0 0 0 1475 0 0 0 1 2 2 2 0 0 0 1 0 2 5 0 o XYZ Co Sales (Net) Costs of Goods Sold Gross Operating Expenses Net Income from Operations Interest Expense Net Income before Income Tax 2 350 l0 0 on Sales 1 128|0.0 7764 0 0 2 4 8 6 0 8595 5 0 8 25 0 o 0 4 8 2 7 7 2 5 0 o o 6 0 I Income Tax Expense 7 6 0 2 4 | |4 | 7|57 |6 Net Income after Income Tax Balance Sheets December 31, 2016 ABC Co XYZ Co Assets Current Assets Property, Plant, and Equip Total Assets 75 0 0 0 0 13 7 56 3 0 1276 600 5586 30 8 1 70 0 0 Liabilities and Stockholders Equi Liabilities Current Liabilities Long-Term Liabilities (Bonds Payable) 3 1 5 0 0 0 25 00 0 0 5 6500 o 205 500 15 000 0 355 50o Total Liabilities Common Stock ($10 Par Value Retained Earnings 50000 0 4 2 1 1 00 92 1 1 00 13 7 56 3 0 1276600 50000 0 3 10 6 3 0 8 10 6 3 0 Total Stockholders' Equity Total Liabilities and Stockholders' Equ