oak Company and Clay Company are similar firms that operate in the same industry. Clay began operations 2 years ago and Roak started 5 years ago. In the current year, both companies pay 7% interest on their debt to creditors. The following additional information is available.

	Roak Company			Clay Company
	Current Year	1 Year Ago	2 Years Ago	Current Year	1 Year Ago	2 Years Ago
Total asset turnover	4.9	4.6	4.8	3.3	3.3	2.9
Return on total assets	9.0%	13.2%	13.8%	5.9%	5.6%	5.3%
Profit margin ratio	4.2%	4.3%	4.1%	6.4%	6.6%	6.5%
Sales	$500,000	$470,000	$486,000	$300,000	$260,000	$200,000

1. (a) Which company has the better profit margin? (b) Which has the better asset turnover? (c) Which has the better return on assets? 2. Which company has the better rate of growth in sales? 3. Did the company successfully use financial leverage in the current year, as judged by return on assets exceeding its interest rate on debt, in the case of (a) Roak and (b) Clay?

Roak Company and Clay Company are similar firms that operate in the same industry. Clay began operations 2 years ago and Roak started 5 years ago. In the current year, both companies pay 7% interest on their debt to creditors. The following additional information is available. Current Year 3.3 Roak Company Current Year 1 Year Ago Total asset turnover 4.9 4.6 Return on total assets 9.0% 13.2% Profit margin ratio 4.2% 4.3% Sales $500,000 $470,000 2 Years Ago 4.8 13.8% 4.1% $486,000 clay Company 1 Year Ago 3.3 5.6% 6.6% $260,000 5.9% 2 Years Ago 2.9 5.3% 6.5% $200,000 6.4% $300,000 1. (a) Which company has the better profit margin? (b) Which has the better asset turnover? (c) Which has the better return on assets? 2. Which company has the better rate of growth in sales? 3. Did the company successfully use financial leverage in the current year, as judged by return on assets exceeding its interest rate on debt, in the case of (a) Roak and (b) Clay? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 (a) Which company has the better profit margin? (b) Which has the better asset turnover? (c) Which has the better return on assets? (a) Which company has the better profit margin? (b) Which has the better asset turnover? (c) Which has the better return on assets? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Which company has the better rate of growth in sales? Which company has the better rate of growth in sales? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Did the company successfully use financial leverage in the current year, as judged by return on assets exceeding its interest rate on debt, in the case of (a) Roak and (b) Clay? (a) Did Roak Company successfully use financial leverage in the current year, as judged by return on assets exceeding its interest rate on debt? (b) Did Clay Company successfully use financial leverage in the current year, as judged by return on assets exceeding its interest rate on debt?