Problem 4-15 (Algo) Compare two companies in the same industry; Chapters 3 and 4 [LO4-10]

Presented below are condensed financial statements adapted from those of two actual companies competing as the primary players in a specialty area of the food manufacturing and distribution industry. ($ in millions, except per share amounts.)

Balance Sheets
	Metropolitan				Republic
Assets
Cash	$	315.3			$	44.1
Accounts receivable (net)		544.7				453.0
Short-term investments						9.1
Inventory		596.4				754.2
Prepaid expenses and other current assets		257.6				604.7
Current assets	$	1,714.0			$	1,865.1
Property, plant, and equipment (net)		2,731.2				2,870.4
Intangibles and other assets		326.3				646.1
Total assets	$	4,771.5			$	5,381.5
Liabilities and Shareholders Equity
Accounts payable	$	608.9			$	815.2
Short-term notes		345.1				672.4
Accruals and other current liabilities		717.2				647.5
Current liabilities	$	1,671.2			$	2,135.1
Long-term debt		679.6				690.3
Deferred tax liability		504.6				730.7
Other long-term liabilities		245.0				227.1
Total liabilities	$	3,100.4			$	3,783.2
Common stock (par and additional paid-in capital)		264.9				467.0
Retained earnings		2,601.9				1,726.9
Less: Treasury stock		(1,195.7	)			(595.6	)
Total liabilities and shareholders equity	$	4,771.5			$	5,381.5
Income Statements
Net sales	$	5,828.0			$	7,886.2
Cost of goods sold		(2,791.0	)			(4,352.7	)
Gross profit	$	3,037.0			$	3,533.5
Operating expenses		(1,612.7	)			(2,900.2	)
Interest expense		(99.8	)			(49.6	)
Income before taxes	$	1,324.5			$	583.7
Income tax expense		(268.7	)			(21.1	)
Net income	$	1,055.8			$	562.6
Net income per share	$	1.1			$	8.5

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.

For both companies, compute the ratios below. (Consider 365 days a year. Do not round in your final answers to 2 decimal places.) Metropolitan Republic Return on Assets 22.13% 10.45% Profit Margin 18.12% 7.10 % Asset Turnover 1.22times 1.47 times Return on Equity 63.18 % 3520 % Equity Multiplier x x Acid-Test Ratio X x Current Ratio X Receivables Turnover x times x times Inventory Turnover X times X times Times Interest Earned X times times