3 Decision making with ratio analysis (10 marks) Heritage Hospital LLC is a well-established private hospital that provides high quality health care services in the United Arab Emirates. They are considering expanding into pharmaceutical research and sales by purchasing InoPharma Inc. They hope that this acquisition will provide new sources of revenue and will help to capture new opportunities presented by the COVID pandemic. InoPharma is a young company that researches and develops new cutting-edge drugs and brings them to the market. They have a significant market share in Qatar. Selected financial data for 2019 Average total assets Average # of common shares outstanding (no preferred shares) Dividends paid Heritage Hospital LLC InoPharma 18,000,000 2,000,000 40,000 20,000 800,000 10000 Net revenue 9,200,000 2,700,000 Cost of goods sold 0 1,300,000 Gross profit 9,200,000 1,400,000 Operating Expenses: Administrative expenses 1,620,000 180,000 Wages and salaries 3,300,000 250,000 Net revenue Cost of goods sold 9,200,000 2,700,000 0 1,300,000 Gross profit 9,200,000 1,400,000 Operating Expenses: Administrative expenses 1,620,000 180,000 Wages and salaries 3,300,000 250,000 Marketing expenses 220,000 100,000 Research and Development expenses 80,000 550,000 Total Operating expenses 5,220,000 1080,000 Net income 3,980,000 320,000 Required: (a) Calculate the following for each company (4 marks) Return on assets Profit margin ratio Earnings per share Payout ratio (b) Compare and analyze each ratio. Do you think that Heritage Hospital LLC should purchase InoPharma? (discuss pros and cons and include both financial and non-financial aspects) (6 marks)