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Suppose you are the CEO of a company, and your Chief Financial Officer (CFO) comes to you and says: I have this great proposal. I

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Suppose you are the CEO of a company, and your Chief Financial Officer (CFO) comes to you and says: "I have this great proposal. I think our company should buy this other company - ABC Berhd. I have done some analysis of this company and computed some ratios. ABC's Gross Margin is 40%, has a Current Ratio of 2.05 and reported an Inventory Turnover of 20.45. Moreover, its Debt-to-Equity ratio is only 25%. ABC Berhad rocks! It's financial performance is excellent. I think we should not think much, and just go ahead and buy this company." Based on what you know about financial statement analysis, how would you respond to this? [5 marks]

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