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Jones Vs. Smith Profitability Ratio's Jones Smith A2 Coursework

¶ … 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....

In 2011 it is apparent from their balance sheet that the company made a large capital investment in 2011 based on a significant increase in long-term liabilities as well as total assets and depreciation. The company also had their accounts receivable increased by over thirty eight percent and a ROA of just over five percent. This indicates that although the company is growing rapidly that they may be experiencing some growth pains. For example, the increase in accounts receivable and…

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