TRUE OR FALSE: Read each sentence carefully and determine whether the statement is True or False.

1. Financial statement analysis uses computational and analytical techniques to evaluate the company's risks, performance, financial health, and future prospects with the objective of making economic decisions.

2. Return on asset is an operational efficiency ratio.

3. Profitability ratios measure the ability of the company's average pricing policy.

4. Gross profit margin provides and indication of the company's average pricing policy.

5. Given equal gross profit margin, the company with the lower operating income margin has higher operating expenses as a percentage of sales and has learner operations.

6. Using another company as benchmark, the company with higher net profit margin is more profitable.

7. Accounts receivable turnover measures the number of days in the company's average collections period.

8. All turnover ratios discussed in this chapter uses the net sales figure as numerator.

9. Debt to equity ratio measures the percentage of assets financed by equity.

10. Current ratio is generally higher than quick ratio.

Below are the comparative Statement of Comprehensive Income and Statement of Financial Position of Elen Company and Melanie Company: Statement of Comprehensive Income Elen Company Melanie Company 20L4 20L3 20L4 20L3 Net Sales P3,407,921.00 P745,883.60 Cost of Goods Sold 2,377,078,00 530,200.00 Selling Expenses 665,005.00 173,800.00 General and administrative expenses 119,900.00 14,630.00 Interest Expense 19,756.00 4,954.40 Net Income P226,182 P22,299.20 Statement of Financial Position Elen Company Melanie Company 20L4 20L3 20L4 20L3 Current Assets 71,715.00 96,102.00 48,774.00 49,939.20 Accounts Receivable 350,000.00 345,600.00 75,675.00 68,543.00 Inventory 275,430.00 225,600.00 43,890.20 40,345.20 Prepaid Assets 20,000.00 20,000.00 15,000.00 16,000.00 Equipment, net 1,146,882.00 1,100,000.00 307,401.60 276,786.40 Total Assets 1,864,027.00 1,787,302.00 490,740.80 451,613.80 Current Liabilities 143,715.00 166,793.00 77,765.60 66,618.20 Long-Term Liabilities 238,700.00 198,000.00 65,164.00 55,000.00 Owner's Capital 1,481,612,00 1,422,509.00 347,811.20 329,995.60 Total Liabilities and Owner's Capital 1,864,027.00 1,787,302.00 490,740.80 451,613.80 Problem 1: Compute for the profitability ratios of both Elen and Melanie. Which of the two companies do you believe is more profitable? Problem 2: Compute for operational efficiency ratios of both Elen and Melanie. Which of the two companies is more efficient? Problem 3: Compute for the financial health ratios of both Elen and Melanie. Which of the two companies is more financially healthy