Selected ratios for three different companies that operate in

three different industries 1 answer below »

Selected ratios for three different companies that operate in three different industries (merchandising,
pharmaceuticals, utilities) are reported in the table below:

Ratio Co. A Co. B Co. C

Gross profit margin ratio 18% 53% n.a.
Net profit margin ratio 2% 14% 8%
Research and development to sales 0% 17% 0.1%
Advertising to sales. 7% 4% 0.1%
Interest expense to sales 1% 1% 15%
Return on assets 11% 12% 7%
Accounts receivable turnover 95 times 5 times 11 times
Inventory turnover 9 times 3 times n.a.
Long-term debt to equity 64% 45% 89%
n.a. =not applicable
Required:
Identify the industry that each of the companies, A, B, and C, operate in. Give at least two reasons
supporting each of your selections.

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Jan 29 2021 07:16 AM

1 Approved Answer

Priyanka G answered on January 31, 2021 5 Ratings,(12 Votes)

Company A is the merchandiser because it has: · High

inventory andaccounts receivableturnover, ·Low gross and net
profit margin ratio, and · Higher advertising to sales ratio
Company B is the pharmaceutical because it has: · High
research and development costs to sales ·...