Zhang Inc. and Black Inc. are similar firms that operate within the same industry. Black began operations
Question:
Zhang Inc. and Black Inc. are similar firms that operate within the same industry. Black began operations in 2018 and Zhang in 2012. In 2020, both companies paid 7% interest to creditors. The following information is available:
Required
The controller of your company has asked you to analyze the above two companies so a decision can be made on whether the company should invest in either company. Prepare a paragraph on each of the below items that you can give to the controller in a memo.
a. Compare the profit margins of each company.
b. Compare the trends of both companies, and comment on the effect the age of the company may have.
c. Compare the asset turnover and discuss any conclusions that can be made about future maintenance expense.
d. Comment on the relative success in employing financial leverage in 2020 for each company.
Step by Step Answer:
Fundamental Accounting Principles Volume II
ISBN: 978-1260305838
16th Canadian edition
Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann