Estimate Cost Structure of the 2 companies. 1. Use the ratio of current assets to total assets as an estimate of the cost structure. Which company has a higher fixed cost structure?

2. Is the current ratio a reasonable representation of the relative cost structure of the two companies? Hint: This would depend on the nature of the non-current assets of your companies.

3. Is the year-to-year change over the past 2 years, in the same direction for the 2 companies?

4. Given the relative cost structures of the two companies, and the change in sales for the 2 companies, what would you have expected for the change in Gross Profit? An increase? Decrease? Why?

2020 Asset Turnover Average inventory Average Shareholders Equity Average Total Assets Cost of Goods Sold Current liabilities Current Ratio EBIT COMPANY A 2019 0.61 762.0 5,510.0 14,961.0 5,416.0 3,251.0 1.89 908.0 822.0 3,900.0 3,650.0 40.26 0.47 769.0 5,804.0 14,894.0 4,396.0 3,435.0 1.68 298.0 252.0 4,071.0 2,626.0 COMPANY B 2019 1.71 42,216.0 86,859.0 278,843.0 278,464.0 126,774.0 1.49 17,099.0 16,679.0 3,691.0 198,360.0 41.60 2020 1.72 44,883.0 89,278.5 281,764.0 289,093.0 130,471.0 1.45 12,409.0 10,159.0 2,377.0 194,706.0 40.25 EBT 37.40 7.11 5.72 6.60 6.44 1.18 Goodwill Gross Profit Gross Profit Inventory Turnover Leverage Ratio Net Income Operating Expenses Property, plant and Equipment Return on Assets Return on Equity Return on Sales Revenues Total Assets Total Current Assets Total Equity Total Liabilities Total Non-Current Assets 1.03 11,211.0 459,725.0 28,290.0 4.02 1.22 3,730.0 471,390.0 46,046.0 1.32 1.10 1,339.0 8,158.0 1,109.0 8.95 24.30 14.77 9,066.0 15,047.0 6,140.0 5,801.0 9,239.0 8,907.0 178.0 6,724.0 1,013.0 1.20 3.07 2.53 7,022.0 14,741.0 5,783.0 5,806.0 8,931.0 8,958.0 12.91 2.35 476,824.0 275,055.0 189,263.0 91,046.0 174,297.0 85,792.0 4.18 0.77 483,799.0 288,473.0 188,549.0 87,511.0 192,089.0 99,924.0 2020 Asset Turnover Average inventory Average Shareholders Equity Average Total Assets Cost of Goods Sold Current liabilities Current Ratio EBIT COMPANY A 2019 0.61 762.0 5,510.0 14,961.0 5,416.0 3,251.0 1.89 908.0 822.0 3,900.0 3,650.0 40.26 0.47 769.0 5,804.0 14,894.0 4,396.0 3,435.0 1.68 298.0 252.0 4,071.0 2,626.0 COMPANY B 2019 1.71 42,216.0 86,859.0 278,843.0 278,464.0 126,774.0 1.49 17,099.0 16,679.0 3,691.0 198,360.0 41.60 2020 1.72 44,883.0 89,278.5 281,764.0 289,093.0 130,471.0 1.45 12,409.0 10,159.0 2,377.0 194,706.0 40.25 EBT 37.40 7.11 5.72 6.60 6.44 1.18 Goodwill Gross Profit Gross Profit Inventory Turnover Leverage Ratio Net Income Operating Expenses Property, plant and Equipment Return on Assets Return on Equity Return on Sales Revenues Total Assets Total Current Assets Total Equity Total Liabilities Total Non-Current Assets 1.03 11,211.0 459,725.0 28,290.0 4.02 1.22 3,730.0 471,390.0 46,046.0 1.32 1.10 1,339.0 8,158.0 1,109.0 8.95 24.30 14.77 9,066.0 15,047.0 6,140.0 5,801.0 9,239.0 8,907.0 178.0 6,724.0 1,013.0 1.20 3.07 2.53 7,022.0 14,741.0 5,783.0 5,806.0 8,931.0 8,958.0 12.91 2.35 476,824.0 275,055.0 189,263.0 91,046.0 174,297.0 85,792.0 4.18 0.77 483,799.0 288,473.0 188,549.0 87,511.0 192,089.0 99,924.0