Assume that you are purchasing an investment and have decided to invest in a company in the

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Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to All Digital Corp. and Green Zone, Inc. and have assembled the following data.
Selected income statement data for the current year:
All Digital Green Zone Net Sales Revenue (all on credit) Cost of Goods Sold Interest Expense $ 417,925 $ 493,115 258,000

Selected balance sheet and market price data at the end of the current year:

All Digital Green Zone Current Assets: Cash $ 23,000 $ 18,000 Short-term Investments 37,000 17,000 Accounts Receivable,

Selected balance sheet data at the beginning of the current year:

Your strategy is to invest in companies that have low price/earnings ratios but appear to be in good shape financially. Assume that you have analyzed all other factors and that your decision depends on the results of ratio analysis.
Requirements
1. Compute the following ratios for both companies for the current year:
a. Acid-test ratio
b. Inventory turnover
c. Days' sales in receivables
d. Debt ratio
e. Earnings per share of common stock
f. Price/earnings ratio
g. Dividend payout
2. Decide which company's stock better fits your investment strategy.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Horngrens Financial And Managerial Accounting The Financial Chapters

ISBN: 9780134486840

6th Edition

Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura

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