The following information is taken from the records of two companies in the same industry:
| A Ltd.
( lakh) |
B Ltd.
( lakh) |
|
| Cash
Debtors Stock Plant and Machinery |
2
3 12 18 |
3
7 10 23 |
| Total Assets | 35 | 43 |
| Sundry Creditors
12% Debentures Equity Capital Reserves and surplus |
9
5 11 10 |
10
10 18 5 |
| Total Liabilities | 35 | 43 |
| Sales
Cost of goods sold Other operating expenses Interest expenses Income tax Dividend |
60
40 8 0.60 3.40 1.00 |
85
65 10 1.20 3.80 2.00 |
Answer each of the following questions by making a comparison of one or more relevant ratios.
(a) Which company is using the shareholders’ money more profitably?
(b) Which company is better able to meet its current debt?
(c) If you want to purchase the debentures of one company which company’s debentures would you buy?
(d) Which company collects its receivables faster assuming all sales are on credit basis?
(e) Which company retains the larger proportion of income in the business?
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