Question

Morck Limited (MOR) and Greta Corporation (GCL) are two companies in the Australian media industry. Information on these companies over the 2013-2015 period has been collected. Based on solely on the ratios provided, which do you believe is the better investment long-term investments?

Ratio	MOR	GCL
Net profit margin	164.42	5.23
Current Ratio	35.16	1.34
Debt to equity	0.34	49.12
ROE	5.64	5.85
ROA	4.99	5.21

Answer 1

GCL would be the better investment in the long run for the

following reasons:

*Its ROA is higher at 5.85%, which means that it is able to

use its assets better.

*Its ROE is higher indicating higher returns to equity. The

higher returns to equity are due to the higher leverage that

GCL has-D/E of 49.12% as against a D/E of 0.34% for MOR.

Though MOR's Net profit margin and Current ratio are much

higher [showing higher liquidity], they are not indicators of

long term stability.