Below Are Selected Ratios for Widget Corporation and Tools Inc

Below are selected ratios for Widget Corporation and Tools Inc. Use this information answer the following questions. $$\begin{array} { | l | l | r | r | r | } \hline & & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \\\hline \text { 1. } & \text { Net operating asset turnover } & 1.4 & 1.31 & 1.25 \\\hline 2 . & \text { Inventory turnover } & 5.6 & 5.0 & 4.6 \\\hline 3 . & \text { Accounts receivable turnover } & 12.1 & 11.9 & 12.1 \\\hline 4 . & \text { Fixed assets turnover } & 1.3 & 1.29 & 1.29 \\\hline 5 . & \text { Net operating profit margin } & 4.5 \% & 4.6 \% & 4.8 \% \\\hline 6 . & \text { Net operating assets/equity } & 2.10 & 1.98 & 1.77 \\\hline \text { 7. } & \text { EBIT/revenues } & 8.9 \% & 8.6 \% & 8.6 \% \\\hline 8 . & \text { Gross margin } & 20.1 \% & 19.9 \% & 19.8 \% \\\hline 9 . & \text { Income tax rate } & 35 \% & 35 \% & 35 \% \\\hline\end{array}$$
a. We know from the residual income method of valuation that, all other things equal, the company with the higher ROCE will have a higher intrinsic value.
b. Why are all other things not likely to be equal in this instance (hint: look at components of ROCE)?
c. Which company has better operating performance (that is, ignoring capital structure).