You work for an investment firm specializing in Atlantic Canadian based publicly traded companies. Your boss is looking into an investment in the seafood industry and has narrowed the selection down to two companies.

In Canada, High Liner Foods and Clearwater Seafoods are both in the seafood industry. Both companies harvest, process, and distribute seafood. Clearwater concentrates on shellfish such as lobster, scallops, clams, cold-water shrimp, and crab, whereas High Liner Foods has a broader product line and includes various species of fish as well as shellfish.

The statement of financial position and statement of income for High Liner Foods Incorporated and Clearwater Seafoods Incorporated are in the attached excel file.

You have been asked to prepare a common-size analysis of the statements of income (loss) for the two companies for both years, explain why you think the profit margins are so different for the two companies, and explain which areas High Liner Foods seems to have an advantage and which areas Clearwater Seafoods has an advantage.

Additionally, you will need to compare the current and quick ratios for the two companies, determine which company is more liquid, and explain why there is a significant difference between the current ratio and the quick ratio for the companies.

Lastly please compare the inventory turnover ratio for each company.

High Liner Foods Incorporated's 2016 Consolidated Statement of Financial Position (in thousands of United States dollars, except per share amounts) 31-Dec-16 2-Jan-16 18,252 75,190 3,783 1,705 252,118 3,340 354,388 1,043 76,335 5,218 6,453 261,771 2,051 352,871 111,322 2,290 115,879 2,495 864 97,176 118,101 329,753 684,141 1,683 102,315 117,824 340,196 693,067 $ $ 621 17,158 ASSETS Current Cash Accounts receivable Income taxes receivable Other financial assets Inventories Prepaid expenses Total current assets Non-current Property, plant and equipment Deferred income taxes Other receivables and miscellaneous assets Intangible assets Goodwill Total non-current assets Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank loans Accounts payable and accrued liabilities Provisions Other current financial liabilities Other current liabilities Income taxes payable Current portion of long-term debt Current portion of finance lease obligations Total current liabilities Non-current liabilities Long-term debt Other long-term financial liabilities Other long-term liabilities Long-term finance lease obligations Deferred income taxes Future employee benefits Total non-current liabilities Total liabilities Shareholders' equity Common shares Contributed surplus Retained earnings 135,272 386 1,626 416 851 120,336 263 817 2,242 11,816 721 139,893 1,015 153,647 266,327 196 888 702 45,183 8,190 321,486 461,379 $ 281,017 89 483 715 46,966 9,631 338,901 492,548 $ 86,094 14,654 146,340 85,282 13,999 125,843 Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity (24,326) 222,762 (24,605) 200,519 684,141 693,067 High Liner Foods Incorporated's 2016 Consolidated Statement of Income (in thousands of United States dollars, except per share amounts) Fifty-two weeks ended 31-Dec-16 2-Jan-16 Revenues $ 976,016 $ $ 1,021,507 Cost of sales 773,179 819,843 Gross profit 202,837 201,664 Distribution expenses 43,610 48,037 Selling, general and administrative expenses 96,978 93,597 Impairment of property, plant and equipment 2,327 Business acquisition, integration and other expenses 4,787 7,473 Results from operating activities 55,135 52,557 Finance costs 14,296 16,247 Income before income taxes 40,839 36,310 Income taxes Current 8,737 5,707 Deferred (848) 1,022 Total income tax expense 7,889 6,729 Net income $ 32,950 $ 29,581 Basic 1.07 0.96 Diluted 1.06 0.95 Basic 30,917,412 30,818,804 Diluted 31,174,788 31,264,671 $ 81 Clearwater Seafoods Incorporated's 2016 Consolidated Statement of Financial Position (In thousands of Canadian dollars) As at December 31 2016 2015 ASSETS Current assets Cash 39,514 51,106 Trade and other receivables (Note 5) 82,108 81,734 Inventories (Note 6) 91,831 65,022 Prepaids and other (Note 7) 5,414 9,587 Derivative financial instruments (Note 8) 4,821 3,788 223,688 211,237 Non-current assets Long-term receivables (Note 9) 8,132 10,076 Other assets 1,164 Property, plant and equipment (Note 10) 233,807 251,197 Investment in equity investee (Note 12) 10,496 9,311 Deferred tax assets (Note 13(c)) 6,429 14,184 Intangible assets (Note 11) 197,321 201,846 Goodwill (Note 11) 49,781 54,180 506,047 541,958 TOTAL ASSETS 729,735 753,195 LIABILITIES Current liabilities Trade and other payables 75,953 82,870 Income taxes payable (Note 13) 4,303 454 Current portion of long-term debt (Note 14) 67,005 65,685 Derivative financial instruments (Note 8) 5,640 18,622 152,901 167,631 Non-current liabilities Long-term debt (Note 14) 369,409 415,084 Other long-term liabilities 887 2,088 Deferred tax liabilities (Note 13(C)) 18,053 19,317 388,349 436,489 SHAREHOLDERS' EQUITY Share capital (Note 15) 210,860 157,161 Contributed surplus 1,419 547 Deficit (4,793) (36,333) Accumulated other comprehensive loss (38,931) (1,625) 168,555 119,750 Non-controlling interest (Note 16) 19,930 29,325 188,485 149,075 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 729,735 753,195 Clearwater Seafoods Incorporated's 2016 Consolidated Statement of Earnings (Loss) (In thousands of Canadian dollars) Year ended December 31 2016 2015 Sales Cost of goods sold 611,551 466,930 144,621 58,492 26,948 504,945 372,757 132,188 51,363 21,634 Administrative and selling costs Net finance costs (Note 8 (d)) Foreign exchange (gains) losses on long-term debt and working capital (Note 8 (e)) (Gains) losses on contract derivatives (Note 8 (f)) Other (income) expense (Note 17) Research and development Earnings (loss) before income taxes Income tax expense (Note 13) Earnings (loss) for the year Earnings (loss) attributable to: Non-controlling interest Shareholders of Clearwater (7,295) (7,279) (5,209) 2,922 68,579 76,042 16,446 59,596 15,668 43,928 59,596 0.71 0.71 46,287 26,763 444 1,981 148,472 (16,284) 4,387 (20,671) 16,937 (37,608) (20,671) (0.65) (0.65) Basic earnings (loss) per share (Note 19) Diluted earnings (loss) per share (Note 19) Please complete your analysis on this tab, please show formulas when used High Liner Foods Account 2015 2016 Clearwater Clearwater 2015 2016 High Liner Foods 2015 2016 Ratio Anaysis 2015 2016 High Liner Foods Incorporated's 2016 Consolidated Statement of Financial Position (in thousands of United States dollars, except per share amounts) 31-Dec-16 2-Jan-16 18,252 75,190 3,783 1,705 252,118 3,340 354,388 1,043 76,335 5,218 6,453 261,771 2,051 352,871 111,322 2,290 115,879 2,495 864 97,176 118,101 329,753 684,141 1,683 102,315 117,824 340,196 693,067 $ $ 621 17,158 ASSETS Current Cash Accounts receivable Income taxes receivable Other financial assets Inventories Prepaid expenses Total current assets Non-current Property, plant and equipment Deferred income taxes Other receivables and miscellaneous assets Intangible assets Goodwill Total non-current assets Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank loans Accounts payable and accrued liabilities Provisions Other current financial liabilities Other current liabilities Income taxes payable Current portion of long-term debt Current portion of finance lease obligations Total current liabilities Non-current liabilities Long-term debt Other long-term financial liabilities Other long-term liabilities Long-term finance lease obligations Deferred income taxes Future employee benefits Total non-current liabilities Total liabilities Shareholders' equity Common shares Contributed surplus Retained earnings 135,272 386 1,626 416 851 120,336 263 817 2,242 11,816 721 139,893 1,015 153,647 266,327 196 888 702 45,183 8,190 321,486 461,379 $ 281,017 89 483 715 46,966 9,631 338,901 492,548 $ 86,094 14,654 146,340 85,282 13,999 125,843 Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity (24,326) 222,762 (24,605) 200,519 684,141 693,067 High Liner Foods Incorporated's 2016 Consolidated Statement of Income (in thousands of United States dollars, except per share amounts) Fifty-two weeks ended 31-Dec-16 2-Jan-16 Revenues $ 976,016 $ $ 1,021,507 Cost of sales 773,179 819,843 Gross profit 202,837 201,664 Distribution expenses 43,610 48,037 Selling, general and administrative expenses 96,978 93,597 Impairment of property, plant and equipment 2,327 Business acquisition, integration and other expenses 4,787 7,473 Results from operating activities 55,135 52,557 Finance costs 14,296 16,247 Income before income taxes 40,839 36,310 Income taxes Current 8,737 5,707 Deferred (848) 1,022 Total income tax expense 7,889 6,729 Net income $ 32,950 $ 29,581 Basic 1.07 0.96 Diluted 1.06 0.95 Basic 30,917,412 30,818,804 Diluted 31,174,788 31,264,671 $ 81 Clearwater Seafoods Incorporated's 2016 Consolidated Statement of Financial Position (In thousands of Canadian dollars) As at December 31 2016 2015 ASSETS Current assets Cash 39,514 51,106 Trade and other receivables (Note 5) 82,108 81,734 Inventories (Note 6) 91,831 65,022 Prepaids and other (Note 7) 5,414 9,587 Derivative financial instruments (Note 8) 4,821 3,788 223,688 211,237 Non-current assets Long-term receivables (Note 9) 8,132 10,076 Other assets 1,164 Property, plant and equipment (Note 10) 233,807 251,197 Investment in equity investee (Note 12) 10,496 9,311 Deferred tax assets (Note 13(c)) 6,429 14,184 Intangible assets (Note 11) 197,321 201,846 Goodwill (Note 11) 49,781 54,180 506,047 541,958 TOTAL ASSETS 729,735 753,195 LIABILITIES Current liabilities Trade and other payables 75,953 82,870 Income taxes payable (Note 13) 4,303 454 Current portion of long-term debt (Note 14) 67,005 65,685 Derivative financial instruments (Note 8) 5,640 18,622 152,901 167,631 Non-current liabilities Long-term debt (Note 14) 369,409 415,084 Other long-term liabilities 887 2,088 Deferred tax liabilities (Note 13(C)) 18,053 19,317 388,349 436,489 SHAREHOLDERS' EQUITY Share capital (Note 15) 210,860 157,161 Contributed surplus 1,419 547 Deficit (4,793) (36,333) Accumulated other comprehensive loss (38,931) (1,625) 168,555 119,750 Non-controlling interest (Note 16) 19,930 29,325 188,485 149,075 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 729,735 753,195 Clearwater Seafoods Incorporated's 2016 Consolidated Statement of Earnings (Loss) (In thousands of Canadian dollars) Year ended December 31 2016 2015 Sales Cost of goods sold 611,551 466,930 144,621 58,492 26,948 504,945 372,757 132,188 51,363 21,634 Administrative and selling costs Net finance costs (Note 8 (d)) Foreign exchange (gains) losses on long-term debt and working capital (Note 8 (e)) (Gains) losses on contract derivatives (Note 8 (f)) Other (income) expense (Note 17) Research and development Earnings (loss) before income taxes Income tax expense (Note 13) Earnings (loss) for the year Earnings (loss) attributable to: Non-controlling interest Shareholders of Clearwater (7,295) (7,279) (5,209) 2,922 68,579 76,042 16,446 59,596 15,668 43,928 59,596 0.71 0.71 46,287 26,763 444 1,981 148,472 (16,284) 4,387 (20,671) 16,937 (37,608) (20,671) (0.65) (0.65) Basic earnings (loss) per share (Note 19) Diluted earnings (loss) per share (Note 19) Please complete your analysis on this tab, please show formulas when used High Liner Foods Account 2015 2016 Clearwater Clearwater 2015 2016 High Liner Foods 2015 2016 Ratio Anaysis 2015 2016