Company X and Company Y Are in the Same Industry

question 11

Essay

Company X and Company Y are in the same industry and have the following ratios.
$$\begin{array} { l c c c } \hline & \text { Comp any } \mathbf { X } & \text { Company } Y & \text { Industry Average } \\\hline \text { Current ratio } & 1.2 & 0.89 & 1.1 \\\text { Debt/equity } & 0.20 & 0.40 & 0.3 \\\text { Total asset turnover } & 1.9 & 2.1 & 2.5 \\\text { Net profit margin } & 4.2 \% & 3.8 \% & 4.0 \% \\\text { Return on equity } & 12.4 \% & 14.8 \% & 15.0 \% \\\text { Dividend payout ratio } & 25.0 \% & 10.0 \% & 20.0 \% \\\hline\end{array}$$ Discuss the relative natures of the two companies in terms of risk and return. Identify the more growth- oriented firm and justify your selection. Support your discussion and conclusions by referring to the ratios.

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Definitions:

Bonus Pay

Additional compensation given to employees on top of their regular salary, often as a reward for achieving specific goals or performance benchmarks.

Correct Figure

An accurate representation or calculation that has been verified to be in line with established facts or standards.

Unethical Behaviour

Actions that deviate from what is considered morally right or acceptable in a professional setting.

Pay Transparency

A policy or practice where employers openly share salary information, such as the basis for pay decisions, in order to ensure fairness and equity.