Hello PLEASE I NEED A NARRATIVE TO THE RESULTS. I NEED HELP EXPLAINING HOW THE RESULTS ARE OBTAIN PLEASE:

Case Study:

You work in the mergers and acquisitions department of a large conglomerate who is looking to invest in a retail business. Two companies, Fashion Forward and Dream Designs, are the final two options being considered. You have the most recent availableincome statements and two years of balance sheetsfor each company.

Compute the following ratios for each company:

• Profit Margin Ratio
• Return on Assets
• Current Ratio
• Quick Ratio
• AR Turnover Ratio
• Average Collection Period
• Inventory Turnover Ratio
• Average Sales Period
• Debt to Equity Ratio

For this assignment:

• Compute all required amounts andexplain how the computations were performed
• Evaluate the results for each company and explain what each ratio means
• Compare and contrast the companies.
• Based on your analysis:
  • recommend which company the organization should pursue
  • Thoroughly support your conclusion, includingwhat other factors should be considered
  • Be specific.

Superior papers will:

• Perform all calculations correctly.
• Articulate how the calculations were performed.
• Evaluate the ratios computed and explain the meaning of the ratios.
• Compare the companies.
• Recommend which company to pursue, supported by well-thought-out rationale and considering any other factors that could impact the recommendation.

Compute the following ratios for each company

Profit Margin Ratio = Net Income / Total Revenue (how much profit sales could generate)

Fashion Forward = 136500 / 2500000 = 5.46%

Dream Designs = 212500 / 5400000 = 3.94%

Fashion Forward is doing well.

Return on Assets = Net Income / Avg. Total Assets (how efficiently assets are used)

Fashion Forward = 136500 / (2747000 + 2805000 ) / 2 = 136500 / 2776000 = 4.92%

Dream Designs = 212500 / (4381250 + 4450000 ) /2 = 212500 / 4415625 = 4.81%

Fashion Forward is doing well.

Current Ratio = Current Assets / Current Liabilities (how efficiently current assets can pay off Current Liabilities)

Fashion Forward = 1297000 / 1170000 = 1.11

Dream Designs = 2280500 / 1625750 = 1.40

Dream Designs is managing Current Liabilities well.

Quick Ratio = Quick Assets / Current Liabilities (Liquid assets ratio to liabilities)

Fashion Forward = (950000 + 200000 ) / 1170000 = 0.983

Dream Designs = (1710000 + 250000 ) / 1625750 = 1.21

Dream Designs is managing liquidity position well.

Accounts Receivable Turnover Ratio = Credit Sales / Avg.Accounts Receivable

Fashion Forward = 2000000 / ( 200000 + 150000 ) / 2 = 2000000/ 175000 = 11.43

Dream Designs = 4320000 / ( 250000 + 275000 ) / 2 = 4320000 / 262500 = 16.46

Dream Designs is managing debtors well

Average Collection Period = 365 / Accounts Receivable Turnover Ratio (how fast debtors are converted in cash)

Fashion Forward = 365 / 11.43 = 31.93 Days

Dream Designs = 365 / 16.46 = 22.17 Days

Inventory Turnover Ratio = Cost of Sales / Avg. Inventory

Fashion Forward = 1400000 / ( 112000 + 105000 ) / 2 = 1400000 / 108500 = 12.90

Dream Designs = 3250000 / ( 200000 + 215000 ) / 2 = 3250000 / 207500 = 15.66

Dream Designs is managing Inventory well

Average Sales Period = 365 / Inventory Turnover Ratio (how fast inventory is sold)

Fashion Forward = 365 / 12.90 = 28.29 Days

Dream Designs = 365 / 15.66 = 23.31 Days

Debt to Equity Ratio = Total Liabilities / Total Equity (Percentage of debt to equity)

Fashion Forward = 1345000 / 1402000 = 0.959

Dream Designs = 1901250 / 2480000 = 0.767

Fashion Forward is more risky