Below is the summary information from the financial statements of two companies competing in the same industry: Income Statement for the year ended 31 December 2021 Panda Company $'000 Koala Company $'000 Sales Cost of goods sold Gross profit Operating expenses Interest expense Net profit before tax Income tax expense Net profit after tax 770,000 539,100 230,900 46,000 7.900 177,000 14,800 162,200 880,200 589,400 290,800 43,100 13,000 234,700 24,300 210,400 Basic earnings per share $4.51 $5.11 Balance Sheet as at 31 December 2021 Koala Company $'000 Assets Cash Accounts receivable Notes receivable (trade & current) Merchandise inventory Prepaid expenses Property, plant and equipment Total Assets Panda Company $'000 19,500 37,400 9,100 84,440 5,000 290,000 445,440 34,000 57,400 7,200 132,500 6,950 304,400 542.450 Liabilities and Equity Current liabilities Notes payable (long-term) Share capital Retained earnings Total Liabilities and Equity 61,340 80,800 180,000 123,300 445,440 93,300 101,000 206,000 142,150 542.450 Beginning-of-year balances (1 January 2021): Accounts receivable 29,800 Notes receivable (trade & current) 0 Merchandise inventory 55,600 Total assets 398,000 Share capital 180,000 Retained earnings 98,300 54,200 0 107,400 382,500 206,000 93,600 Additional information: Dividend paid (per share) Current market price (per share) $3.80 $75 $3.55 $70 (1) Perform a vertical (common-size) analysis of the income statements and balance sheets for both companies. (2) Calculate and compare the following financial ratios/amounts for both companies (two decimal places for percentages and no decimal place for dollar amounts and number of days): (a) Liquidity Working capital Current ratio Quick/acid-test ratio (b) Solvency Debt ratio Debt-to-equity ratio Time interest earned (C) Efficiency Accounts and notes) receivable turnover Days' sales in receivables (average collection period) Inventory turnover Days' sales in inventory Total asset turnover (d) Profitability Gross profit margin Net profit margin Return on total assets Return on equity (e) Market Perspective Price-earnings (P/E) ratio Dividend yield (3) Based on the ratio analysis in (2) above, evaluate the financial health of both companies in respect of their liquidity, solvency, efficiency, profitability, and market perspective. (4) Based on your evaluation in (3) above, identify which company's shares you would recommend as the better investment. Provide explanations