The information below is taken from the records of two companies in the same industry. The companies are X Ltd and Y Ltd; and the data is as follows:

Answer each of the following questions by making a comparison of one, or more, relevant ratios.
(i) Which company is using the equity shareholders’ money more profitably?
(ii) Which company is better able to meet its current debts?
(iii) If you were to purchase the debentures of one company, which company’s debentures would you buy?
(iv) Which company collects its receivables faster, assuming all sales to be credit sales?
(v) Which company is extended credit for a longer period by the creditors, assuming all purchases (equivalent to cost of goods sold) to be credit purchases?
(vi) How long does it take each company to convert an investment in stock to cash?
(vii) Which company retains the larger proportion of income in the business?

Transcribed Image Text:

Particulars Cash Debtors (net) Stock Plant and equipment Total assets Sundry creditors 8% Debentures Equity share capital Retained earnings Total liabilities Sales X Ltd *2,10,000 3,30,000 12,30,000 16,95,000 34,65,000 9,00,000 5,00,000 11,00,000 9,65,000 34,65,000 56,00,000 Y Ltd *3,20,000 6,30,000 9,50,000 24,00,000 43,00,000 10,50,000 10,00,000 17,50,000 5,00,000 43,00,000 82,00,000