The objective is to utilize ratio analysis to make financial decisions.

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We learned that ratios are used extensively in financial management to help determine the overall financial health of an organization and its worthiness for investment. Ratios are basically performance indicators that measure management's overall effectives in managing a company. They are a good way to evaluate the operating performance of a firm.

There are many ratios that are available to managers for measuring performance. Many of these ratios have several permutations or slight variation differences. However, they all help to tell a story about the performance of a company. It is important to note that the results are not an end in themselves. They are simply an additional source of information to stimulate questions, encourage further investigation, and generate additional analysis with the ultimate goal of better economic analysis for improved managerial decisions.

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• How would you approach problem 3-37 and what formulas using the Excel template provided below please?
• Please explain (a. To which company would you, as cdi manager for a supplier, approve the extension of short-term trade credit and why?).
• Please explain (b. In which one would you buy stock and why?).

Problem 3-37 Instructions Enter formulas to calculate the following ratios. If Use a 360 day year. One way of analyzing the situation for each comp those ratios which would be most important to a s Profit margin Retum on assets Retum on equity Receivable tumover Average collection period Inventory tumover Fixed asset tumover Total asset tumover Current ratio Quick ratio Debt to total assets Times interest eamed Fixed charge coverage b. In which one would you buy stock? Why? Home Solution Jones and Smith Comparison Jones Corp. FORMULA FORMULA FORMULA FORMULA times FORMULA days FORMULA times FORMULA time FORMULA times FORMULA times times FORMULA FORMULA FORMULA FORMULA Problem 3-22 times times Smith Corp. FORMULA a. To which company would you, as credit manager for a supplier, approve the extension of (short-term) trade credit? Why? Problem 3-23 FORMULA FORMULA FORMULA times FORMULA days FORMULA times FORMULA tim FORMULA times times times FORMULA FORMULA FORMULA times FORMULA FORMULA times Problem 3-24 Problem 3-36 Problem 3-37