P18.9A (LO 4,5,6) AN Selected ratios for two companies operating in the office supply industry follow. Evaluate ratios. Fournitures Lte Supplies Unlimited 0.8:1 2.2 times 2.8:1 Ratio Acid-test ratio Asset turnover Current ratio Debt to total assets Gross profit margin Interest coverage Inventory turnover Operating cycle Price-earnings ratio Profit margin Receivables turnover Return on assets Return on equity 1.0:1 2.6 times 1.7:1 35.0% 23.9% 4.2 times 6.0 times 92 days 19.0 times 5.6% 11.8 times 14.6% 19.8% 30.3% 35-4% 6.6 times 3.1 times 158 days 15.2 times 4.196 9.1 times 9.0% 12.5% Instructions a. Both companies offer their customers credit terms of net 30 days. Indicate the ratio(s) that should be used to assess how well the accounts receivable are managed. Which company appears to be managing its accounts receivable better? b. Indicate the ratio(s) that should be used to assess inventory management. Which company appears to be managing its inventory better? c. Supplies Unlimited's current ratio is higher than Fourniture's. Identify two possible reasons for this. d. Which company is more solvent? Identify the ratio(s) that should be used to determine this and defend your choice. e. You notice that Fourniture's gross profit margin is significantly less than Supplies Unlimited's but its profit margin is higher. Identify two possible reasons for this. f. Which company do investors appear to believe has greater prospects for future profitability? Indicate the ratio(s) you used to reach this conclusion and explain your reasoning, Taking It Further Which company is using leverage more effectively? Explain