Parable Invest (Parable) is a major investment firm that seeks to invest in organizations in the food industry. Their investments include acquiring, merging or partial ownership of companies in the food industry. Pappoe Company (Pappoe) and Allotey Limited (Allotey) have particularly peaked Parable's interest of late. Pappoe and Allotey are in the business of producing canned foods. Parable is open to investing in any one of the companies or both based on expert recommendations. You have been hired as a Consultant by Parable to specifically analyze the performance of Pappoe and Allotey and to offer your recommendations on which one of the companies to invest in. In your role as an expert, you also have the option of recommending or not recommending both companies based on your assessment. The only publicly available information you have for your analysis includes: The 2019 income statement and balance sheet of Pappoe and Allotey (refer below) Selected 2019 beginning balances of balance sheet accounts for Pappoe and Allotey (refer below) Food industry ratios (refer below) Required: 1. Calculate the following ratios for Pappoe and Allotey: a. Current Ratio b. Quick Ratio c. Accounts Receivable Turnover Ratio d. Inventory Turnover Ratio e. Debt to Equity Ratio f. Times Interest Earned Ratio g. Profit Margin Ratio h. Return on Common Stockholders' Equity Ratio 2. Using the following ratios, describe your recommendation(s) and the basis for your recommendation(s): a. Current Ratio b. Accounts Receivable Turnover Ratio C. Debt to Equity Ratio d. Times Interest Earned Ratio e. Profit Margin Ratio f. Return on Common Stockholders' Equity Ratio Pappoe's year-end (2019) Income Statement and Balance Sheet is outlined below: Income Statement Balance Sheet Net Sales 14,000,200.00 Assets Cash Prepaid Insurance Accounts Receivable Inventory Furniture & Equip. Furniture & Equip - Accum. Depr. Liabilities Accounts Payable Salaries & Wages Payable Notes Payable - Short Term Notes Payable - Long Term Total Liabilities Expenses Cost of Goods Sold Operating Expenses General & Administrative Expenses Interest Expense Income Tax Expense Total Expenses Net Income Before Preferred Dividends Preferred Dividends Net Income After Preferred Dividends 6,905,002.00 1,356,000.00 2,382,511.00 5,238,155.00 12,759,210.00 (4,659,545.00) 3,964,900.00 569,972.00 2,032,832.00 938,698.00 1,638,790.00 3,435,640.00 8,045,960.00 (8,575,000.00) (1,569,850.00 (1,206,369.00) (950,500.00) (1,035,100.00) (13,336,819.00) 663,381.00 (150,000.00) 513,381.00 Land Leasehold Improvements Owners' Equity Capital Stock Retained Earnings Total Owners Equity 15,755,940.00 4,714,305.00 20,470,245.00 Total Assets 28,516,205.00 Total liabilities & Owners Equity 28,516,205.00 The beginning balances for selected Pappoe accounts are as follows: January 1, 2019 Balances (Beginning Balances) Cash 6,953,500.00 Prepaid Insurance 1,465,000.00 Accounts Receivable 2,626,140.00 Inventory 6,587,155.00 Furniture & Equipment (Net of Depr.) 8,524,040.00 Accounts Payable 2,961,200.00 Salaries & Wages Payable 815,095.00 Notes Payable - Short Term 1,429,803.00 Notes Payable - Long Term 4,206,525.00 Retained Earnings 5,688,140.00 Capital Stock 12,250,660.00 Allotey's year-end (2019) Income Statement and Balance Sheet is outlined below: Balance Sheet Income Statement Net Sales (91% comprises of net credit sales) 73,563,566.00 Assets Cash Prepaid Insurance Accounts Receivable Inventory Furniture & Equipment (Net of Depr.) 90,293,325.00 106,751.00 25,945,002.00 88,251,000.00 60,728,910.00 Liabilities Accounts Payable Salaries & Wages Payable Notes Payable - Long Term 85,656,890.00 9,161,271.00 20,249,547.00 Total Liabilities 115,067,708.00 Expenses Cost of Goods Sold Advertising Expense Office Supplies Expense Depreciation Expense Salaries & Wages Expense Utilities Expense Interest Expense Income Taxes Total Expenses Preferred Dividends Net Income 46,902,233.00) (500,500.00) (102,506.00) (699,930.00) (11,156,500.00) (798,509.00) (2,010,367.00) (9,114,350.00) (71,284,895.00) Owners'Equity Capital Stock Retained Earnings Total Owners Equity 96,598,530.00 53,658,750.00 150,257,280.00 2,278,671.00 Total Assets 265,324,988.00 Total Liabilities & Owners Equity 265,324,988.00 The beginning balances of selected Allotey accounts are as follows: January 1, 2019 Balances (Beginning Balances) Cash 67,397,002.00 Prepaid Insurance 115,000.00 Accounts Receivable 39,569,101.00 Inventory 92,001,215.00 Furniture & Equipment (Net of Depr.) 66,234,671.00 Accounts Payable 92,003,157.00 Salaries & Wages Payable 8,329,002.00 Total Owners' Equity 123,658,005.00 The industry averages of the food industry are as follows: Financial Ratio Current Ratio Debt to Equity Ratio Times Interest Earned Ratio Return on Common Stockholders' Equity Ratio Accounts Receivable Turnover Ratio Profit Margin Ratio Industry 2.5 0.46 6.67 0.02 2.55 0.04