EXERCISE 1–1 Selected ratios for three different companies that operate in three different industries (merchandising, pharmaceuticals, utilities) are reported in the table below:

Ratio Co. A Co. B Co. C Gross profit margin ratio . . . . . . . . . . . . . . . 18% 53% n.a.

Net profit margin ratio . . . . . . . . . . . . . . . . 2% 14% 8%

Research and development to sales . . . . . . 0% 17% 0.1%

Advertising to sales . . . . . . . . . . . . . . . . . . . 7% 4% 0.1%

Interest expense to sales . . . . . . . . . . . . . . . 1% 1% 15%

Return on assets . . . . . . . . . . . . . . . . . . . . . 11% 12% 7%

Accounts receivable turnover . . . . . . . . . . . 95 times 5 times 11 times Inventory turnover . . . . . . . . . . . . . . . . . . . . 9 times 3 times n.a.

Long-term debt to equity . . . . . . . . . . . . . . . 64% 45% 89%

n.a.  not applicable Required:

Identify the industry that each of the companies, A, B, and C, operate in. Give at least two reasons supporting each of your selections.