Fave Sdn Bhd and Dave Co are the players in the same industry. The following information are the extracted Statement of Profit or Loss and Statement of Financial Position from 2020 for both companies.

Statement of Profit or Loss for the year ended 31 December 2020

	RM	RM
	Fave Sdn Bhd	Dave Co.
Sales	1,070,000	2,820,000
Cost of goods sold	(700,000)	(2,050,000)
Selling and administrative expenses	(230,000)	(490,000)
Interest expense	(10,000)	(32,000)
Income taxes	(42,000)	(65,000)
Net income	88,000	183,000

Statement of Financial Position as at 31 December 2020

	RM	RM
	Fave Sdn Bhd	Dave Co.
Cash	30,000	55,000
Accounts receivable	65,000	120,000
Inventory	90,000	210,000
Investments	60,000	130,000
Intangibles	30,000	40,000
Property, plant, and equipment	200,000	40,000
Total assets	475,000	595,000
Accounts payable	80,000	180,000
Bonds payable	120,000	430,000
Preferred stock, RM1 par	70,000	50,000
Common stock, RM10 par	120,000	300,000
Retained earnings	60,000	120,000
Total liabilities and capital	450,000	1,080,000

You are required to:

Calculate the ratios that relate to the long-term debt paying ability for both companies based on the data above.

marks)

Which company is in the better position to take additional long-term debt based on the results that you calculated in (a) and information given.