1. Fill in the blanks and give reasons: (15 points)Company A Company B ROE 2% 8% Profit Margin % 7%

1. Fill in the blanks and give reasons: (15 points)Company A Company B ROE 2% 8% Profit Margin % 7% 4% TAT 1.7 3.0 ROA 11% 8.7% Generic Strategy How different are the two firms’ financials? How are they related to their strategies?__________________________________________________________________________________________________________________________________________________________________________________________________ __________ 1 2. If two firms (Firm A and Firm B) have equal ROA and sales, but Firm A has a higher profitmargin than Firm B. Which firm has more assets? (5 points)A. Firm AB. Firm BC. SameD. Can’t tell 3. In the income statement, R&D expenses are: (5 points)a. Operating expensesb. Cost of goods sold (COGS)c. Non operating expensesd. Special charges__________ The information below is excerpted from the financial statements of two companies. Use thisinformation to answer the following questions.(in $ million)CompanyCompany BANet revenues31296107958Net income12883426Total current assets29564.518672.5Total assetsTotal current liabilities1537012708.5Total liabilities3203024671Total stockholders’5403.517823equityFootnote: Approximately 98% of Company A’s account receivables are from unpaid balancescarried by customers using the store credit card. 4. Which company is less liquid (i.e., more risky in the short-term)? Justify using appropriateratio(s). (10 points)___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________2 5. Which company is more leveraged? Justify using appropriate ratio(s). (10 points)___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Use the information below to answer questions 6-7-8. Table -1 % growth in revenues from 2008 to 2009 3 4 7. Calculate and show % change in revenues for Airline carriers (with primary SIC code 4512) forthe year 2009 ONLY (from 2008 to 2009).Compare and benchmark the growth rate using the industry growth in Table-1 above.Which airline carrier is better in terms being able to increase their revenues in the year 2009?Which company is the worst? Interpret your analysis by using the information given in the “KeyPoints-Current Environment” table as well. (25 points) 5 8. For the year-end 2008 (from 2007 to 2008), which airline carrier (with primary SIC code 4512)was able to increase their profit per each $1 worth of revenues they have generated over that year?Name the type of the statement (s) you need to use for such analysis? (25 points) 9. For the year 2008, for SAAS AB COGS and SG&A expenses are increasing. Still, however, itsEarning per Share (EPS) is increasing considerably. How might this be possible?Comment on the increase in EPS for SAAS AB using the information from an independentauditor’s statement in the footnote: (20 points)Note: SAAS AB bought back a portion of its outstanding common stock during 2007 and in 2008 6

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