7.7 John Easterwood recently inherited a large sum of money and is considering the purchase of one of two family-owned companies for sale in his hometown of Eastaboga, Alabama. The two firms are the Ancel Grocery Store and Starks Furniture Store. The balance sheets and income statements for these firms are given below. Ancel Grocery Starks Furniture Income statement Net sales 1,200,000 200,000 Cost of goods sold 960,000 100,000 Gross profit 240,000 100,000 Operating expenses 210,000 32,000 Net Operating Income 30,000 68,000 Interest expenses 6.000 20,000 Profit before tax 24,000 48,000 Taxes 12,000 24,000 Net income 12,000 24,000 Balance sheet Cash 30,000 15,000 Marketable securities 10,000 5,000 Accounts receivables 30,000 40,000 Inventory 20,000 60,000 Current assets 90,000 120,000 Net fixed assets 110,000 120,000 Total assets 200,000 240,000 Accounts payable 15,000 20,000 Notes payable 15,000 40,000 Current liabilities 30,000 60,000 Long term debt 25,000 30,000 Common stock 85,000 70,000 Retained earnings 60,000 80,000 Total liabilities & equity 200,000 240,000 a) Calculate the operating profit margin ratio, the net profit margin ratio, the book return on assets, and the book return on equity for each firm. b ) What advice would you give to Mr. Easterwood? What are the weaknesses of a recommendation to purchase either company using these data