Presented below are condensed financial statements adapted from those of two actual companies competing as the primary players in a specially area of the food manufacturing and distribution industry (Sin millions, except per share amounts.) Balance Sheets Metropolitan Republic $ $ 179.3 422.7 37.1 325. 466.4 114.6 $ 1,203.0 2,608.2 210.3 $ 4,021.5 65.2 476.2 $ 1,478.7 2,064.6 464.2 $ 4,000.0 $ Assets Cash Accounts receivable (net) Short-term investments Inventory Prepaid expenses and other current assets Current assets Property, plant, and equipment (net) Intangibles and other assets Total assets Liabilities and Shareholders' Equity Accounts payable Short-term notes Accruals and other current liabilities Current liabilities Long-term debt Deferred tax liability Other long-term liabilities Total liabilities Common stock (par and additional paid in capital) Retained earnings Less Treasury stock Total liabilities and shareholdersequity Income Statements $ 467.9 227.1 585.2 $1,250.2 535.6 384.0 10.0 $2,4 14419 2,4769 04. $4,021.5 691.2 557.4 538.5 1,787.1 542.3 618.7 95.1 335.0 1,601.9 19641) 5.000.0 Income Statements Net sales Cost of goods sold Gross profit Operating expenses Interest expense Income before taxes Income tax expense Net Income Net income per share $ 5,698.e (2,999.0) $ 2,789. (1,743.7) (56.8) $ 988.5 (394.7) $ 593.8 $ 2.40 $ 2,768.2 (4,481.2) $ 3,286.5 (2,539.2) (46.6) 5 700.7 (276.1) $ 424.6 $ 6.50 Evaluate and compare the two companies by responding to the following questions. Note: Because comparative statements are not provided you should use year-end balances in place of average balances as appropriate Required: 1. For both companies, compute the ratios below 2. Evaluate and compare the two companies. Complete this question by entering your answers in the tabs below. Required Required 2 Republic % Metropolitan % % times % % times % Return on Assets Profit Margin Asset Turnover Return on Equity Equity Multiplier Acid-Test Ratio Current Ratio Receivables Turnover Inventory Turnover Times Interest Earned times times times times times times key Required 2 > Analysis Which of the two firms had greater earnings relative to resources available? Metropolitan Have the two companies achieved their respective rates of return on assets with Yes similar combinations of profit margin and turnover? From the perspective of a common shareholder, which of the two firms provided a Metropolitan greater rate of return? Which company has made the most effective use of financial leverage? Metropolitan of the two companies, which appears riskier in terms of its ability to pay short-term obligations? Republic Which of the two companies manages their current assets more efficiently? Metropolitan From the perspective of a creditor, which company offers the most comfortable margin of safety in terms of its ability to pay fixed interest charges? Metropolitan
