Shelzo Inc., a manufacturer of construction equipment is considering the purchase of one of its suppliers, Raritron Industries. The purchase has been given preliminary approval by Shelzo's Board of Directors, and several discussions have taken place between the management of both companies. Raritron has submitted financial data for the past several years. Shelzo's controller has analyzed Raritron's financial statements and prepared the following ratio analysis comparing Raritron's performance with the industry averages.
Required:
Using the information provided above for Raritron Industries:
a. 1. Identify the two ratios from the above list that would be of most interest to short-term creditors.
Explain what these two ratios measure.
What do these two ratios indicate about Shelzo Inc.?
b. 1. Identify the three ratios from the above list that would be of most interest to stockholders.
Explain what these three ratios measure.
What do these three ratios indicate about Shelzo Inc.?
c. 1. Identify the two ratios from the above list that would be of most interest to long-term creditors.
Explain what these two ratios measure.
What do these two ratios indicate about Shelzo Inc.?

Question

Shelzo Inc., a manufacturer of construction equipment is considering the purchase of one of its suppliers, Raritron Industries. The purchase has been given preliminary approval by Shelzo's Board of Directors, and several discussions have taken place between the management of both companies. Raritron has submitted financial data for the past several years. Shelzo's controller has analyzed Raritron's financial statements and prepared the following ratio analysis comparing Raritron's performance with the industry averages.  
Required:
Using the information provided above for Raritron Industries:
a. 1. Identify the two ratios from the above list that would be of most interest to short-term creditors.
Explain what these two ratios measure.
What do these two ratios indicate about Shelzo Inc.?
b. 1. Identify the three ratios from the above list that would be of most interest to stockholders.
Explain what these three ratios measure.
What do these three ratios indicate about Shelzo Inc.?
c. 1. Identify the two ratios from the above list that would be of most interest to long-term creditors.
Explain what these two ratios measure.
What do these two ratios indicate about Shelzo Inc.?

Quizplus · Accepted Answer

The Answer of Shelzo Inc., a manufacturer of construction equipment is considering the purchase of one of its suppliers, Raritron Industries. The purchase has been given preliminary approval by Shelzo's Board of Directors, and several discussions have taken place between the management of both companies. Raritron has submitted financial data for the past several years. Shelzo's controller has analyzed Raritron's financial statements and prepared the following ratio analysis comparing Raritron's performance with the industry averages.  
Required:
Using the information provided above for Raritron Industries:
a. 1. Identify the two ratios from the above list that would be of most interest to short-term creditors.
Explain what these two ratios measure.
What do these two ratios indicate about Shelzo Inc.?
b. 1. Identify the three ratios from the above list that would be of most interest to stockholders.
Explain what these three ratios measure.
What do these three ratios indicate about Shelzo Inc.?
c. 1. Identify the two ratios from the above list that would be of most interest to long-term creditors.
Explain what these two ratios measure.
What do these two ratios indicate about Shelzo Inc.?