Presented below are selected ratios for four firms. Badgley is a heavy equipment manufacturer, Reagan is a newspaper publisher, Klein is a food manufacturer, and Taylor is a grocery chain.

Required:
1. Which firm has the weakest current ratio?
2. Explain why the turnover ratios vary so much among the four firms.
3. Explain why the return on equity ratio is larger than the return on asset ratio for all four firms.
4. Discuss whether the large differences in the return on equity ratios can exist over long periods of time.

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Badgley Reagan Klein Taylor Short-term liquidity ratio Current ratio Debt management ratio Long-term debt to equity Asset efficiency ratios Accounts receivable turnover 1.3 1.7 1.0 1.6 0.09 1.81 0.45 0.30 4.66 8.28 11.92 116.15 40.26 Inventory turnover Profitability ratios Operating income 6.26 7.29 8.43 12.6% 25.4% 21.2% 3.8% Net income 5.9 10.9 10.6 10.8 1.9 Return on assets 4.7 16.8 10.3 22.6 Return on equity 36.0 38.0 21.2