a. Discuss with THREE reasons why carrying out financial ratio analysis among companies is better than just reading respectively the financial statements of companies. 

b. Calculate ROI (for management’s use) and ROE (for stockholders’ use) for HFL and TSL for the year ended 31 December 2019. 

c. Based on the results of the ROI and ROE analysis in part b in Question 1, discuss which company (HFL or TSL) uses financial leverage in a more effective manner. 

d. Discuss with TWO supporting ratio calculations each which company (HFL or TSL) has a better inventory management. 

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Angelina is the Financial Analyst of Champion Analyst Limited ("CAL"). In May 2020, Healthy Food Limited ("HFL") hired CAL to provide comparative analysis on different financial areas between HFL and its major competitor, Tasty Soup Limited ("TSL"), for the year ended 31 December 2019. Both HFL and TSL are listed on the Hong Kong Stock Exchange and are engaged in the manufacturing and sales of canned soup. Angelina is responsible for this comparative analysis project ("project"). The following financial information was given to Angelina to complete the project. All the figures are in HKD millions. Table 1 - Financial performance and financial position figures for HFL and TSL HFLS TSL S Net sales revenue Cost of goods sold Income from operations Net income Total assets (current and non-current), 1 January 2019 Total liabilities (current and non-current), 1 January 2019 Total liabilities (current and non-current), 31 December 2019 Total stockholders' equity, 31 December 2019 35,400 30,000 1,500 1,300 63,500 56,000 87,300 64,000 68,900 19,000 5,000 4,800 73,500 62,300 65,000 11,000 Table 2 - Current assets figures for HSL and TSL as at 1 January 2019 and 31 December 2019 HFL S TSL S Cash, 1 January 2019 Cash, 31 December 2019 Accounts receivable, 1 January 2019 Accounts receivable, 31 December 2019 Inventory, 1 January 2019 Inventory, 31 December 2019 26,000 29,000 28,000 32,000 3,200 4,800 5,000 3,000 4,500 5,600 3,000 1,000 Table 3 - Dividend, diluted earnings per share and closing market price per share on 31 December 2019 for HSL and TSL HFLS TSL S Annual cash dividend payment per share Diluted earnings per share Closing market price per share as at 31 December 2019 0.60 0.90 3.00 42.00 1.40 14.00 Angelina is the Financial Analyst of Champion Analyst Limited ("CAL"). In May 2020, Healthy Food Limited ("HFL") hired CAL to provide comparative analysis on different financial areas between HFL and its major competitor, Tasty Soup Limited ("TSL"), for the year ended 31 December 2019. Both HFL and TSL are listed on the Hong Kong Stock Exchange and are engaged in the manufacturing and sales of canned soup. Angelina is responsible for this comparative analysis project ("project"). The following financial information was given to Angelina to complete the project. All the figures are in HKD millions. Table 1 - Financial performance and financial position figures for HFL and TSL HFLS TSL S Net sales revenue Cost of goods sold Income from operations Net income Total assets (current and non-current), 1 January 2019 Total liabilities (current and non-current), 1 January 2019 Total liabilities (current and non-current), 31 December 2019 Total stockholders' equity, 31 December 2019 35,400 30,000 1,500 1,300 63,500 56,000 87,300 64,000 68,900 19,000 5,000 4,800 73,500 62,300 65,000 11,000 Table 2 - Current assets figures for HSL and TSL as at 1 January 2019 and 31 December 2019 HFL S TSL S Cash, 1 January 2019 Cash, 31 December 2019 Accounts receivable, 1 January 2019 Accounts receivable, 31 December 2019 Inventory, 1 January 2019 Inventory, 31 December 2019 26,000 29,000 28,000 32,000 3,200 4,800 5,000 3,000 4,500 5,600 3,000 1,000 Table 3 - Dividend, diluted earnings per share and closing market price per share on 31 December 2019 for HSL and TSL HFLS TSL S Annual cash dividend payment per share Diluted earnings per share Closing market price per share as at 31 December 2019 0.60 0.90 3.00 42.00 1.40 14.00

Answer rating: 100% (QA)

a Three Reasons 1 It helps in comparing two companies of different sizesie TurnoverCapital etc Examp... View the full answer