Paragraph Font Question 5 (18 marks, 32 minutes) Two car companies, Diesel Co and Electric Cars have the following information: 2016 Sales COGS Operating expenses Interest expense Income tax expense Cash Other current assets Long-term assets Current liabilities Long-term liabilities Share capital Retained earnings Diesel Co 2017 164,550 118,360 35,597 407 1,580 15,850 29,020 34,920 9,070 18,800 21,360 21,954 Slectric Cars 2017 2016 227,370 120,600 75,000 8,580 5,640 15,600 13,000 108,000 88,550 252,000 251,520 86,000 67,887 114,290 129,250 61,440 58,200 96,320 75,290 13,793 8,140 36,840 10,200 12,639 20,040 7,252 1) Using the information above, calculate the following ratios 2017 (10 marks): D Focus DE a. Current ratio b. Gross margin percentage C. Return on equity d. Return on assets e. Debt-to-equity ratio 2) Using the ratios calculated above, explain the following (8 marks) a. What does the return on assets represent? Which company has a better return? (2 marks) b. What does the gross margin percentage? Which company has a better margin? (2 marks) c. Explain why a would a bank care about each of the following ratios? i. Current ratio (2 marks) il. Debt to equity ratio (2 marks) D. Focus 3