Abacus Ltd. and Zandi Corp. are competing businesses. Abacus owns all of its operating assets, financed largely by secured loans. Zandi leases its operating assets from a major industrial leasing company. The 20X2 SCIs and SFPs for the two companies are shown below.

Required:
1. Compute the following ratios for both companies (for convenience, use 20X2 year-end balance sheet amounts instead of averages):
a. Operating margin
b. Asset turnover
c. Return on assets
d. Return on shareholders’ equity
e. Total debt-to-shareholders’ equity
2. Evaluate the two companies, based on the ratios you have calculated. Which company do you think is more profitable?

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Statements of Comprehensive Income Year ended 31 December 20X2 Sales revenue Direct costs of providing services Depreciation Other expenses Total operating expenses Net operating earnings Interest expense Earnings before income taxes Provision for income taxes Net earnings and comprehensive income Abacus $540,000 300,000 100,000 60,000 460,000 80,000 24,000 56,000 17,000 $ 39,000 Zandl $270,000 150,000 10,000 87,000 247,000 23,000 23,000 7,000 $ 16,000