Question 1 (a) The Tristar Mutual Fund (TMF) manager is considering and investment in the stock of Best Computer (BC) and ask for your opinion regarding the company. Below are financial ratios for BC and its comparative industry average. The ratios of BC are computed from its financial statements. Best Computer Industry Average Current ratio 3.45 3.10 Acid-test ratio 2.58 1.85 Total debt to equity 0.674 Times interest earned 9.2 9.89 Return on asset 31.4% 30.0% Return on equity 52.6% 50.0% Gross profit margin 36.0% 34.3% Operating profit margin 16.7% 15.9% Earnings yield 8.1% 7.9% Dividend yield 0% 0.5% 0.690 Required: (i) Interpret the ratios of Best Computer and draw inference on the company financial position and performance. (15 marks) (ii) Conclude your interpretations on BC performance. (1 mark) (b) Selected ratios for three different companies that operates in three different industries (merchandising, pharmaceuticals and utilities are reported in the table below. Ratios A B Gross profit margin 18% 53% na Net profit margin 2% 14% 8% R&D to sales 0% 17% 0,1% Advertising to sales 7% 4% 0.1% ROA 11% 12% 7% AR turnover 95x 5x 11x Inventory turnover 9x 3x na Long term debt to equity 64% 45% 89% Required: From the ratios above, identify the possible industry for each company. Give reason for your (9 marks) [Total : 25 Marks] answers