Presented as follows are 12 financial ratios for two companies in separate industries. Ford Motor Company manufactures automobiles and sells them to retail dealers. AutoZone, Inc. sells automobile parts and car-care products directly to consumers.

Required

a. Determine which company appears to be the most profitable. Explain the reasons for your decision, and include any needed discussion of the difficulties of comparing ratios from these two companies.

b. Determine which company appears to be using its assets most efficiently. Explain the reasons for your decision, and include any needed discussion of the difficulties of comparing ratios from these two companies.

c. Determine which company appears to have the greater financial risk. Consider both short-term and long-term financial risk. Explain the reasons for your decision, and include any needed discussion of the difficulties of comparing ratios from these two companies.

d. Based on these ratios only, which company do you think is the better investment opportunity? Explain the reasons for your decision, and include any needed discussion of the difficulties of comparing ratios from these two companies.

Transcribed Image Text:

Ford AutoZone Ratio December 31, 2018 August 27, 2018 Asset turnover .6 1.2 Average days to collect receivables Average days to sell inventory 25.5 8.4 30.1 1.20 274.3 Current ratio .92 Debt to assets .86 1.16 Dividend yield as of March 22, 2019 Earnings per share (EPS) Net margin Plant assets to long-term liabilities Price-earnings as of March 22, 2019 Return on equity 7.0% $.93 n/a") $49.59 2.3% 11.9% 21 .84 9.6 18.8 10.3% n/a Return on investment 1.4% 14.3%