Consider the following financial ratios for two companies: Consider the following financial ratios for two companies:

Days in inventory $=365$ days $\frac{?}{?}($cost of goods sold $\frac{?}{?}$ average inventory$)$

ABC Company: $47$

XYZ Company: $55$

Debt to assets $=$ total liabilities $\frac{?}{?}$ total assets

ABC Company: $0\mathrm{.}66$

XYZ Company: $0\mathrm{.}58$

Current ratio $=$ current assets $\frac{?}{?}$ current liabilities

ABC Company: $1\mathrm{.}34$

XYZ Company: $1\mathrm{.}56$

Times interest earned $=($net income $+$ interest expense $+$ income tax expense$)/$ interest

expense

ABC Company: $5\mathrm{.}89$

XYZ Company: $6\mathrm{.}45$

Profit margin $=$ net income $\frac{?}{?}$ net sales

ABC Company: $4\mathrm{.}3\%$

XYZ Company: $7\mathrm{.}6\%$

Average collection period $=365$ days $\frac{?}{?}($net credit sales $\frac{?}{?}$ average net accounts receivable$)$

ABC Company: $28$

XYZ Company: $32$

Asset turnover $=$ net sales $\frac{?}{?}$ average total assets

ABC Company: $1\mathrm{.}12$

XYZ Company: $1\mathrm{.}03$

Which ratios indicate ABC Company is more profitable than $xYZ$ Company? Select all that

apply.

Days in inventory

Debt to assets

Current ratio

Times interest earned

Profit margin

Average collection period

Asset turnover

None of these ratios indicate ABC Company is more profitable than $xYZ$ Company

Days in inventory $=365$ days $/($cost of goods sold $/$ average inventory$)$

ABC Company: $47$

XYZ Company: $55$

Debt to assets $=$ total liabilities $/$ total assets

ABC Company: $0\mathrm{.}66$

XYZ Company: $0\mathrm{.}58$

Current ratio $=$ current assets $/$ current liabilities

ABC Company: $1\mathrm{.}34$

XYZ Company: $1\mathrm{.}56$

Times interest earned $=($net income $+$ interest expense $+$ income tax expense$)/$ interest expense

ABC Company: $5\mathrm{.}89$

XYZ Company: $6\mathrm{.}45$

Profit margin $=$ net income $/$ net sales

ABC Company: $4\mathrm{.}3\%$

XYZ Company: $7\mathrm{.}6\%$

Average collection period $=365$ days $/($net credit sales $/$ average net accounts receivable$)$

ABC Company: $28$

XYZ Company: $32$

Asset turnover $=$ net sales $/$ average total assets

ABC Company: $1\mathrm{.}12$

XYZ Company: $1\mathrm{.}03$

Which ratios indicate ABC Company is more profitable than XYZ Company? Select all that apply.

Question $5$Answer

Days in inventory

Debt to assets

Current ratio

Times interest earned

Profit margin

Average collection period

Asset turnover

None of these ratios indicate ABC Company is more profitable than XYZ Company