YOU are the manager of Citibank. Jones Corp and Smith Corp have both applied for 10-year construction loans. Citibank can only approve one of these loans. Based on the results of your ratio analysis, which company - Jones OR Smith - will you approve for the 10-year construction loan? Why? Which specific ratios did you rely on to arrive at your decision?

Ratio Results:

Jones Corporation: Smith Corporation:

Profit Margin .90% 4.40%

Return on assets 1.56% 15.71%

Return on equity 2.26% 42.82%

Receivable Turnover 6.68 times 24.76 times

Average collection period 53.93 days 14.54 days

Inventory Turnover 24.51 times 23.28 times

Fixed asset turnover 3.11 times 5.94 times

Total asset turnover 1.73 times 3.57 times

Current ratio 2.36 times 2.38 times

Quick ratio 1.98 times 1.46 times

Debt to total assets 31.10% 63.30%

Times interest earned 11.75 times 7.01 times

Fixed charge coverage. 5.95 times 4.92 times