Selected ratios for the current year for two companies in the office supplies industry, Bureau Nouveau Inc.

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Selected ratios for the current year for two companies in the office supplies industry, Bureau Nouveau Inc. and Supplies Unlimited Corp., follow:
Selected ratios for the current year for two companies in

Instructions
(a) Both companies offer their customers credit terms of net 30 days. Indicate which ratio(s) should be used to assess how well the accounts receivable are managed. Comment on how well each company appears to be managing its accounts receivable.
(b)
Indicate the ratio(s) used to assess inventory management. Which company is managing its inventory better?
(c) Supplies Unlimited's current ratio is higher than that of Bureau Nouveau. Identify two possible reasons for this.
(d) Which company is more solvent? Identify the ratio(s) used to determine this, and defend your choice.
(e) You notice that Supplies Unlimited's gross profit margin is higher and its profit margin lower than those of Bureau Nouveau. Identify two possible reasons for this.
(f) What is mostly responsible for Bureau Nouveau's higher return on assets: profit margin or asset turnover? Explain.
(g) What is mostly responsible for Bureau Nouveau's higher return on common shareholders' equity: return on assets or use of debt? Explain.
(h) Bureau Nouveau's payout ratio is lower than Supplies Unlimited's. Indicate one possible reason for this.
(i) What is the market price per share of each company's common shares?
(j) Which company do investors appear to believe has greater prospects for growing in future (for price appreciation)? Indicate the ratio(s) you used to reach this conclusion, and explain your reasoning.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Related Book For  book-img-for-question

Financial Accounting Tools for Business Decision Making

ISBN: 978-1119368458

7th Canadian edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

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