Compute the ratios to which one would you as credit manager

Question

Problem

Given the financial statements for Jones Corporation and Smith Corporation:

JONES CORPORATION
Current Assets			Liabilities
Cash	$	29,700	Accounts payable	$	166,000
Accounts receivable		88,500	Bonds payable (long term)		82,100
Inventory		51,300
Long-Term Assets			Stockholders' Equity
Fixed assets	$	542,000	Common stock	$	150,000
Less: Accumulated depreciation		(154,700)	Paid-in capital		70,000
Net fixed assets*		387,300	Retained earnings		88,700
Total assets	$	556,800	Total liabilities and equity	$	556,800

Sales (on credit)	$	1,914,000
Cost of goods sold		771,000
Gross profit		1,143,000
Selling and administrative expense†		325,000
Less: Depreciation expense		59,600
Operating profit		758,400
Interest expense		9,200
Earnings before taxes		749,200
Tax expense		102,300
Net income	$	646,900

*Use net fixed assets in computing fixed asset turnover.
†Includes $7,900 in lease payments.

SMITH CORPORATION
Current Assets			Liabilities
Cash	$	39,800	Accounts payable	$	76,500
Marketable securities		12,200	Bonds payable (long term)		225,000
Accounts receivable		74,600
Inventory		77,700
Long-Term Assets			Stockholders' Equity
Fixed assets	$	509,000	Common stock	$	75,000
Less: Accumulated depreciation		(252,600)	Paid-in capital		30,000
Net fixed assets*		256,400	Retained earnings		54,200
Total assets	$	460,700	Total liabilities and equity	$	460,700

*Use net fixed assets in computing fixed asset turnover.

SMITH CORPORATION
Sales (on credit)	$	1,150,000
Cost of goods sold		687,000
Gross profit		463,000
Selling and administrative expense†		281,000
Less: Depreciation expense		59,200
Operating profit		122,800
Interest expense		27,100
Earnings before taxes		95,700
Tax expense		54,200
Net income	$	41,500

Includes $7,900 in lease payments.

(a-1) Compute the following ratios.

(a-2) To which one would you, as credit manager for a supplier, approve the extension of (short-term) trade credit?

(b) In which one would you buy stocks?