Presented below are condensed financial statements adapted from those of two actual companies competing as the primary players in a specialty area of the food manufacturing and distribution industry. ($ in millions, except per share amounts.)

Required:

Evaluate and compare the two companies by responding to the following questions.

Note: Because comparative statements are not provided you should use year-end balances in place of average balances as appropriate.

1. Which of the two firms had greater earnings relative to resources available?

2. Have the two companies achieved their respective rates of return on assets with similar combinations of profit margin and turnover?

3. From the perspective of a common shareholder, which of the two firms provided a greater rate of return?

4. Which company is most highly leveraged and which has made most effective use of financial leverage?

5. Of the two companies, which appears riskier in terms of its ability to pay short-term obligations?

6. How efficiently are current assets managed?

7. From the perspective of a creditor, which company offers the most comfortable margin of safety in terms of its ability to pay fixed interest charges?