¶ … Jones vs. Smith
Profitability Ratio's
Jones
Smith
Profit Margin
Return on assets
Return on equity
Liquidity Ratios
Current Ratio
Quick Ratio
If I were a credit manage I would approve a short-term trade credit to Smith before I would to Jones since their current and quick ratios are both higher. However, given the fact that all of the liquidity ratios were higher than one, I would probably offer them both a short-term line of credit.
If I were an investor however, I would be more attracted to Jones' operation since he not only receives a greater profit margin, but also makes better use of his assets and his equity....
purchase of Smithon Manufacturing, Mr. Jones wants to know if he should outright purchase all of the stock. 1(a). Smithon Manufacturing requires new equipment, which will cause debt for the first two years. If Mr. Jones decides to purchase all shares of the company, he will inherit the company's debt. Already the owner of Johnson Services company, one option is to issue debt to pay for the Smithon company. Issuing
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