Below are selected ratios provided for the current year for two companies in the fast food industry, Blue Ltd. and Yellow Ltd.:

		Blue	Yellow
Basic earnings per share		$0.98	$1.37
Current ratio		2.2:1	2:1
Debt to total assets		56%	72%
Gross profit margin		78.8%	60.0%
Inventory turnover		5.8 times	9.9 times
Price-earnings ratio		14.3 times	20.3 times
Profit margin		9.3%	12.2%
Receivables turnover		9.8 times	10.4 times
Return on assets		9.3%	10.2%
Times interest earned		12.3 times	6.9 times

Instructions

(a) Which company is more profitable (0.5 marks)? Describe your reasoning and identify any ratio(s) used to determine this (1 marks).

(b) Which ratio(s) are used to assess inventory management (0.5 marks). Describe which company is managing their inventory better (1 marks)?

(c) Which company is more solvent (0.5 marks)? Describe your reasoning and identify any ratio(s) used to determine this (1 marks).

(d) Which company is more liquid (0.5 marks)? Describe your reasoning and identify any ratio(s) used to determine this (1 mark).

(e) Which company do investors appear to believe has greater prospects for future growth (e.g. stock price appreciation) (0.5 marks)? Which ratio(s), if any, did you use to reach this conclusion (0.5 marks).