40) Company A and Company B are in the same industry and have the following ratios.
a b
current...

Question

40) Company A and Company B are in the same industry and have the following ratios.
a b
current ratio:1.2 .89
debt/equity: .20.40
total asset turnover: 1.92.1
Return on Equity: 12.4% 14.8%
Dividend Payout ratio: 25% 10%

Discuss the relative natures of the two companies in terms of risk and return. Identify the more growth-oriented firm and justify your selection. Support your discussion and conclusions by referring to the ratios.

David · Accepted Answer

Company A and Company B are in the same industry and have the following ratios. Company A 
B Current ratio 1.2 .89 Debt/equity 0.20 0.40 Net profit margin 4.2% 3.8% Return on equity 12.4 
14.8 Dividend payout ratio 25.0 10.0. Discuss the relative natures of the two companies in terms 
of risk and return. Identify the more growth-oriented firm and justify your selection. Support 
your discussion and conclusions by referring to the ratios.
A B 
   Current Ratio 1.2 0.89 
Debt Equity Ratio 0.2 0.4 
Net profit margin 4.20% 3.80% 
Return on Equity 12.4 14.8 
Dividend payout ratio 25 10 
Solution:- 
By comparing the ratios of companies A and B both operating in same industry we can analyze 
their nature.

40) Company A and Company B are in the same industry and have the following ratios. a b current ratio:1.2 .89 debt/equity: .20.40 total asset turnover: 1.92.1 Return on Equity: 12.4% 14.8% Dividend...

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