Weybridge Corp. (Weybridge) and Kennetcook Ltd. (Kennetcook) are small retail stores. They are identical in every respect€”amount of sales, quantity of inventory sold, number of employees. Everything is the same except that Weybridge uses FIFO as its cost formula and Kennetcook uses average cost.

You also learn that on December 31, 2016 the balances in inventory for the two companies were:

Required:
a. Calculate the following ratios for each of the companies:
i. Current ratio
ii. Quick ratio
iii. Inventory turnover ratio
iv. Average number of days inventory on hand
v. Gross margin percentage
vi. Profit margin percentage
b. Which company has the strongest liquidity position?
c. Which company is most profitable?
d. Which company manages its inventory most effectively?
e. The two companies' bankers lend money based on the amount of accounts receivable and inventory on hand. Which company will be able to obtain the largest loan? From the banks' point of view, is the company that receives the largest loan the best credit risk?Explain.

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Income Statemeats For the Year Ended December 31, 2017 Weybridge (FIFO) Kennetcook averags cost $885,000 Revenue Cost af sales Gross margin Other expensas Net income $885,000 332,760 263,730 lass) Balance Sheets as of December 31, 2017 Weybridge Kennetcook average cost) FIFD 23,700 263,750 Cash Accounts receivable Other current assets Totsl current assets Property, plant, and equipment (net) Total assets Liabilities and Shareholders eqaity 360,950 $37,500 188,750 S 37,500 188,750 Accounts payable Other current liabilities Total current liabilities Long-term debt Other non-current liabilities Total liabilities Capital stock Retained eanings Total liabilities and shareholders equity 242,500 320,500 50,000 Ending Inventory Balances on Dacember 31, 2016 Weybridge AFO S240,000 Kennetcook (average cost) $241,406 Inventory