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X Company's investment committee: ratio analysis select one

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Take the role of an investment analyst at X Company. It is your job to recommend investments for your clients. The only information you have are some ratio values for two companies the pharmaceutical industry.

Write a report to X Company's investment committee. Recommend on e company's stock over the other. State the reason for the recommendation.

Ration Healthtime Mocek

Return on equity 21.5% 32.3%
Return on assets 16.4% 17.1%
Day's sales in receivables 42 36
Inventory Turnover 8 6
Gross Profit Margin 51% 53%
Net Income as a % of sales 8.3% 7.2%
Times interest earned 9 16

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Solution Summary

Discussion is 111 words and selects Mocek. The ratios are interpreted briefly for you.

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I would select Mocek. Mocek has stronger gross profit, a measure of the ability to price above cost in the market place (important measure of market impact). While they have lower profit margin ...

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Carol Sargent, PhD
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  • MSc, University of Virginia
  • PhD, Georgia State University
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