Question
The following ratios are for the Roval Co., Blue Corp., and their industry averages. Roval Co. Blue Corp. Industry Average Current ratio 700% 200% 480%
The following ratios are for the Roval Co., Blue Corp., and their industry averages.
| Roval Co. | Blue Corp. | Industry Average |
Current ratio | 700% | 200% | 480% |
Quick ratio | 180% | 100% | 230% |
A/R turnover | 12 times | 12 times | 6 times |
Return on assets | 21% | 29% | 23% |
Total asset turnover | 7 times | 3 times | 5 times |
Required:
a.. Explain a potential factor for the large difference between current and quick ratios of Roval, compared to differences of Blue and industry average.
b. Comment on the short-term liquidity and asset utilization ratios of the Roval and Blue, in relation to the industry averages.
c. Determine the operating profit margins of Roval, Blue, and industry.
d. Discuss the attractiveness of investment in Roval v. Blue, considering the respective profitability & turnover ratios, relative to the industry averages.
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