Below is comparative information on two companies in the same industry:

Below is comparative information on two companies in the same industry:

Year ended

King Industries Dec 31, 2017

Queen Industries Dec 31, 2017

Sales (all on account) Cost of Goods Sold Operating Expenses Interest Expenses Tax Expense

Net Income

$1,550,000 1,010,000 170,000 20,000 70,000$280,000

$3,600,000 2,350,000 390,000 260,000 120,000$480,000

King Industries

Queen Industries

As at December 31st

2017

2016

2017

2016

Cash

Accounts Receivable Inventory Equipment (net) Total Assets

$90,000 220,000 300,000

2,240,000

$2,850,000

$90,000 270,000 290,000

1,950,000

$2,600,000

$140,000 610,000 690,000

3,920,000

$5,360,000

$160,000 510,000 600,000

3,700,000

$4,970,000

Current Liabilities

Long Term Liabilities Common Stock

Retained Earnings

Total Liabilities plus Equity

$560,000 210,000 40,000 2,040,000$2,850,000

$520,000 190,000 40,000 1,850,000$2,600,000

$490,000 2,350,000 140,000 2,380,000$5,360,000

$450,000 2,100,000 140,000 2,280,000$4,970,000

Common Shares outstanding:

Share price on Dec 31, 2017:

52,000common shares outstanding for the year.

$74.00

118,000common shares outstanding for the year.

$64.00

Required:5 marks each

1. Calculate and explain the liquidity of the companies for 2018 and 2017. (5 marks)
2. Calculate and explain the profitability of the firm in 2018. (5 marks)
3. Calculate and explain the efficiency of the companies for 2018 and 2017. (5 marks)
4. Compute one ratio that shareholders will use in assessing the value of their shares in 2018. (5 marks)
5. Calculate and explain the solvency for 2018 and 2017 for each company. (5 mark)
6. Using the above ratios, explain which company is a better one to invest in and why. Using the ratios you derived, justify and explain your recommendation.