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Question 4 (10 marks) The following table presents a selection of financial ratios for SweetDelight and ChocFinest, two businesses that operate in the same industry:
Question 4 (10 marks) The following table presents a selection of financial ratios for SweetDelight and ChocFinest, two businesses that operate in the same industry: SweetDelight ChocFinest Asset turnover 1 times 0.6 times Debtors days 1.5 days 35 days Current Ratio 0.57 1.6 Total debt to equity ratio 105.42% 265.73% Profit margin 7.40% 5.34% Quick Ratio 1.09 1.2 Return on equity (ROE) 25.6% (15.7)% Return on assets (ROA) 5.90% 2.42% Required: a) Classify the above ratios into the categories of profitability, asset efficiency, liquidity and capital structure. (2 marks) b) Compare the ratio results of the two businesses. Based on your analysis, identify and explain which company would be considered the best investment. (8 marks)
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