Below are summarized balance sheets and income statements of three U.S. companies:

a. Compute the working capital requirement of the three firms and prepare their managerial balance sheets.

b. Compute the three firms’ operating margin, invested capital turnover, return on capital employed, financial multiplier, and the tax effect. What is the relationship between these ratios and the firms’ return on equity?

c. One firm is in the retail (nongrocery) industry, another is a utility firm, and the last one is in the computer (software) industry. Which of the companies corresponds to Firm 1, Firm 2, and Firm 3?

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Income Statements (in millions) Firm 1 $166,809 Firm 2 Firm 3 Revenues Earnings before interest and tax Earnings before tax Earnings after tax $7,132 1,419 1,114 $ 714 $22,956 10,937 14,275 $ 9,421 10,105 9,083 S 5,745 Balance Sheets (in millions) $23,798 5 Accounts receivable 1 1 3 assets Short-term debt Accounts payable Accrued expenses Long-term liabilities Owners' equity Total liabilities and owners' equity 2 0