You are presented with the financial documents for Siam Red Company shown below: a. As a financial advisor, compare both companies (Siam Red, and Burma Amrub) and industry data Compute all ratios before answering, b. In which one would you buy stock? Why? $100,000 80,000 Current Assets Cash.. Accounts receivable Inventory.... Long-Term Assets Fixed assets...... Less: Accumulated depreciation Net fixed assets* Total assets.... SIAM RED COMPANY Liabilities $ 20,000 Accounts payable.............. 80,000 Bonds payable (long-term).... 50,000 Stockholders' Equity $500,000 Common stock..... (150,000) Paid-in capital 350,000 Retained earnings... $500,000 Total liab, and equity. $150,000 70,000 100,000 $500,000 Sales (on credit). Cost of goods sold. Gross profit ........ Selling and administrative expense Less: Depreciation expense. Operating profit........ Interest expense. Earnings before taxes.. Tax expense..... Net income. *Use net fixed assets in computing fixed asset turnover. $1,250,000 750,000 500,000 257,000 50,000 193,000 8,000 185,000 92.500 $ 92,500 $ 75,000 210,000 BURMA AMRUB CORPORATION Current Assets Liabilities Cash $ 35,000 Accounts payable Marketable securities. 7,500 Bonds payable (long-term) ... Accounts receivable. 70,000 Inventory.. 75,000 Long-Term Assets Stockholders' Equity Fixed assets. $500,000 Common stock Less: Accum. dep. (250,000) Paid-in capital. Net fixed assets 250,000 Retained earings Total assets.. $437,500 Total liab, and equity $ 75,000 30,000 47,500 S437,500 *Use net fixed assets in computing fixed asset turnover. BURMA AMRUB CORPORATION Sales (on credit). Cost of goods sold Gross profit...... Selling and administrative expense Less: Depreciation expense Operating profit... Interest expense. Earnings before taxes Tax expense. Net income.. $1,000,000 600.000 400,000 224,000 50.000 126,000 21.000 105,000 52.500 $ 52,500 Industry Ratios Profit margin Return on assets. Return on equity Receivables turnover Inventory turnover Fixed-asset turnover Total-asset turnover Current ratio. Quick ratio... Debt to total assets. Interest coverage.... Industry 5.75% 6.90% 9.20% 4.35X 6.50X 1.85X 1.20% 1.45X 1.10X 25.05% 5.35X Compare the ratios to the industry data that is given. Discuss the weak points, strong points, and what you think should be done to improve each company's performance. You are presented with the financial documents for Siam Red Company shown below: a. As a financial advisor, compare both companies (Siam Red, and Burma Amrub) and industry data Compute all ratios before answering, b. In which one would you buy stock? Why? $100,000 80,000 Current Assets Cash.. Accounts receivable Inventory.... Long-Term Assets Fixed assets...... Less: Accumulated depreciation Net fixed assets* Total assets.... SIAM RED COMPANY Liabilities $ 20,000 Accounts payable.............. 80,000 Bonds payable (long-term).... 50,000 Stockholders' Equity $500,000 Common stock..... (150,000) Paid-in capital 350,000 Retained earnings... $500,000 Total liab, and equity. $150,000 70,000 100,000 $500,000 Sales (on credit). Cost of goods sold. Gross profit ........ Selling and administrative expense Less: Depreciation expense. Operating profit........ Interest expense. Earnings before taxes.. Tax expense..... Net income. *Use net fixed assets in computing fixed asset turnover. $1,250,000 750,000 500,000 257,000 50,000 193,000 8,000 185,000 92.500 $ 92,500 $ 75,000 210,000 BURMA AMRUB CORPORATION Current Assets Liabilities Cash $ 35,000 Accounts payable Marketable securities. 7,500 Bonds payable (long-term) ... Accounts receivable. 70,000 Inventory.. 75,000 Long-Term Assets Stockholders' Equity Fixed assets. $500,000 Common stock Less: Accum. dep. (250,000) Paid-in capital. Net fixed assets 250,000 Retained earings Total assets.. $437,500 Total liab, and equity $ 75,000 30,000 47,500 S437,500 *Use net fixed assets in computing fixed asset turnover. BURMA AMRUB CORPORATION Sales (on credit). Cost of goods sold Gross profit...... Selling and administrative expense Less: Depreciation expense Operating profit... Interest expense. Earnings before taxes Tax expense. Net income.. $1,000,000 600.000 400,000 224,000 50.000 126,000 21.000 105,000 52.500 $ 52,500 Industry Ratios Profit margin Return on assets. Return on equity Receivables turnover Inventory turnover Fixed-asset turnover Total-asset turnover Current ratio. Quick ratio... Debt to total assets. Interest coverage.... Industry 5.75% 6.90% 9.20% 4.35X 6.50X 1.85X 1.20% 1.45X 1.10X 25.05% 5.35X Compare the ratios to the industry data that is given. Discuss the weak points, strong points, and what you think should be done to improve each company's performance