QUESTION

1. Below are selected ratios for three companies which operate in three different industries: Discount Retail Store, Drug and Utility.

Industry	A	B	C
COGS/Sales	80%	58%	n/a
R&D/Sales	0%	7%	0.1%
Advertising/Sales	Not defined	3%	0.1%
Interest/Sales	0.9%	1%	6%
Net Income/Sales	2.5%	10%	10%
Return on Assets	8.5%	10.6%	7.2%
Inventory Turnover	5.5	4	n/a
Accounts receivable turnover	100	6	9
Long term debt/equity	60%	50%	92%
n/a= not applicable

Identify which industry each of the companies A, B and C operate in. Give TWO (2) reasons for each of your selections.

b) Use the following information for ABC incorporated:

Items	Value (RM000 millions)
Assets	200
Shareholder Equity	118
Sales	225
Net Income	18
Interest Expense	2

i) Discuss and appraise the value of ABC Incorporateds return on equity?

ii) Assuming net income is not given, if ABC's net profit margin is 10%, appraise the value of ABCs return on equity (ROE).

c) The Majestic Blind Co. sells its finished product for an average of $35 per unit with a variable cost per unit of $21. The company has fixed operating costs of $1,050,000.

You are required evaluate the firms operating breakeven point in units and dollars. In addition, using 100,000 units as a base, appraise the firms degree of operating leverage