Suppose selected financial data of Edgewater Company and The Ritter Company for 2014 are presented here (in millions).

Edgewater Ritter Income Statement Data for Year Net sales $1,356.0 $1,436.5 Cost of goods sold 776.3 771.7 Selling and administrative expenses 380.6 605.5 Interest expense 0.1 0.1 Other income (expense) 9.0 .5 Income tax expense 63.6 19.7 Net income $ 144.4 $ 40.0 Balance Sheet Data (End of Year)

Current assets $ 885.7 $ 617.2 Noncurrent assets 280.8 219.1 Total assets $1,166.5 $ 836.3 Current liabilities $ 166.5 $ 218.0 Long-term debt 29.9 41.1 Total stockholders’ equity 970.1 577.2 Total liabilities and stockholders’ equity $1,166.5 $ 836.3 Beginning-of-Year Balances Total assets $1,027.3 $860.4 Total stockholders’ equity 830.7 561.7 Current liabilities 187.9 285.6 Total liabilities 196.6 298.7 Other Data Average net accounts receivable $293.2 $196.1 Average inventory 239.1 194.3 Net cash provided by operating activities 124.5 38.6 Capital expenditures 34.3 30.5 Dividends 20.9 –0–

Instructions

(a) For each company, compute the following ratios.

(1) Current ratio. (8) Return on assets.

(2) Accounts receivable turnover. (9) Return on common stockholders’ equity.

(3) Average collection period. (10) Debt to assets ratio.

(4) Inventory turnover. (11) Times interest earned.

(5) Days in inventory. (12) Current cash debt coverage.

(6) Profit margin. (13) Cash debt coverage.

(7) Asset turnover. (14) Free cash flow.

(b) Compare the liquidity, solvency, and profitability of the two companies.

AppendixLO1