Assume you are purchasing an investment and decide to invest in a company in the home re-modeling
Question:
Assume you are purchasing an investment and decide to invest in a company in the home re-modeling business. You narrow the choice to Build It Right, Inc. or Structurally Sound, Corp. You assemble the following selected data:
Selected income statement data for the current year follow:
Selected balance sheet and market price data at the end of the current year follow:
Selected balance sheet data at the beginning of the current year follow:
Your investment strategy is to purchase the shares of the company that has a low price/earnings ratio but appears to be in good shape financially. Assume that you analyzed all other factors and your decision depends on the results of the ratio analysis to be performed.
Requirement
Compute the following ratios for both companies for the current year and decide which company's shares better fits your investment strategy.
a. Quick ratio
b. Inventory turnover
c. Days€™ sales in receivables
d. Debt ratio€ƒ
e. Earnings per share of common shares
f. Price/earnings ratio
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...
Step by Step Answer:
Financial Accounting
ISBN: 978-0132889711
1st Canadian Edition
Authors: Jeffrey Waybright, Liang Hsuan Chen, Rhonda Pyper