Calculating and interpreting profitability and risk ratios. Nike and Reebok maintain dominant market .shares in the athletic footwear market. Nike places somewhat greater emphasis on the performance characteristics of its footwear, whereas Reebok places somewhat greater emphasis on the fashion characteristics of its footwear. Exhibit 5.24 presents comparative balance sheets for Nike and Reebok at the end of Year 10 and Year 1 1. Exhibit 5.25 presents an income statement for each firm for Year 11. Cash flows from operations for Year 11 were $255 million for Nike and

$173 million for Reebok. The income tax rate is 35 percent. On the basis of this information and appropriate financial statement ratios, which company is

a. more profitable?

b. less risky in terms of short-term liquidity?

c. less risky in terms of long-term solvency?

LO1.