Are both companies using leverage effectively

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Reference no: EM132180053

Question - Ratios Hunter co History Co Return on Net operating assets RNOA 21% 18% Net Operating Profit Margin 0.025 0.038 Net operating Asset Turnover 8.4 4.74 Return on Equity ROE 0.45 0.2 Financial leverage FLEV 105% 5% Spread 19% 3% Basics Eraning per share EPS 0.76 0.33 Current ratio 1.32 1.2 Times interest earned 17.64 21 Free Cash flow to total debt 0.0029 0.5333

Required: Analyze the ratios above and answer the following questions. You must provide a detailed answer

a. Are both companies using leverage effectively? Explain your answer.

b. Which firm would you invest in? Why?

c. Interpret the ROA versus ROE and EPS for both companies.

Reference no: EM132180053

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