Assume you are an investment analyst at a brokerage firm. It is your job to recommend investments for your clients. The only information you have are some ratio values for two companies in the pharmaceuticals industry.
Ratio PharmaKurtz Harvan-Smith
Return on equity ...................................................... 21.5% ..............................32.3%
Return on assets ...................................................... 16.4%........................................ 17.1%
Days' sales in receivables ............................................ 42.................................... 36
Inventory turnover ......................................................... 8..................................... 6
Gross profit percentage ............................................. 51%.......................................... 53%
Net income as a percentage of sales .......................... 8.3%......................................... 7.2%
Times interest earned ...................................................... 9................................... 16
Write a report to the brokerage firm's investment committee. Recommend one company's stock over the other. State the reasons for your recommendation.