When would you want to use the basic earning power to compare companies instead of the return on assets?
If a company has a return on assets of 10% and has a debt-to-assets ratio of 50%, what is the company's return on equity? Suppose you calculate the following ratios for two companies, A and B.
|
Company A |
Company B |
| Current ratio |
2 |
2 |
| Quick ratio |
1 |
1.5 |
What can you say about the relative investment in inventory?