Assume that you are purchasing an investment and have decided to invest in a company in...
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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 Digitalized Corp. and Very Zone, Inc. and have assembled the following data. (Click to view the income statement data.) (Click to view the balance sheet and market price data.) 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. Read the requirements. Data Table Selected income statement data for the current year: Net Sales Revenue (all on credit) Cost of Goods Sold Interest Expense Net Income Print $ Digitalized Done 416,100 S 212,000 0 56,000 - X Very Zone 496,035 261,000 16,000 76,000 Data Table Selected balance sheet and market price data at the end of the current year: Digitalized Current Assets: Cash Short-term Investments Accounts Receivables, Net Merchandise Inventory Prepaid Expenses Total Current Assets Total Assets Total Current Liabilities Total Liabilities Common Stock: $1 par (11,000 shares) $1 par (15,000 shares) Total Stockholders' Equity Balance sheet: Accounts Receivables, net Merchandise Inventory Total Assets Common Stock: $1 par (11,000 shares) $1 par (15,000 shares) $ $ 69 69 Market Price per Share of Common Stock Dividends Paid per Common Share Selected balance sheet data at the beginning of the current year: Digitalized 27,000 $ 37,000 37,000 64,000 21,000 186,000 $ Print Done 261,000 $ 100,000 100,000 11,000 161,000 71.26 0.90 40,000 $ 83,000 259,000 11,000 Very Zone 16,000 15,000 48,000 100,000 15,000 194,000 326,000 97,000 133,000 15,000 193,000 111.54 0.70 Very Zone 49,000 85,000 270,000 15,000 X 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. Print Done X 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 Digitalized Corp. and Very Zone, Inc. and have assembled the following data. (Click to view the income statement data.) (Click to view the balance sheet and market price data.) 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. Read the requirements. Data Table Selected income statement data for the current year: Net Sales Revenue (all on credit) Cost of Goods Sold Interest Expense Net Income Print $ Digitalized Done 416,100 S 212,000 0 56,000 - X Very Zone 496,035 261,000 16,000 76,000 Data Table Selected balance sheet and market price data at the end of the current year: Digitalized Current Assets: Cash Short-term Investments Accounts Receivables, Net Merchandise Inventory Prepaid Expenses Total Current Assets Total Assets Total Current Liabilities Total Liabilities Common Stock: $1 par (11,000 shares) $1 par (15,000 shares) Total Stockholders' Equity Balance sheet: Accounts Receivables, net Merchandise Inventory Total Assets Common Stock: $1 par (11,000 shares) $1 par (15,000 shares) $ $ 69 69 Market Price per Share of Common Stock Dividends Paid per Common Share Selected balance sheet data at the beginning of the current year: Digitalized 27,000 $ 37,000 37,000 64,000 21,000 186,000 $ Print Done 261,000 $ 100,000 100,000 11,000 161,000 71.26 0.90 40,000 $ 83,000 259,000 11,000 Very Zone 16,000 15,000 48,000 100,000 15,000 194,000 326,000 97,000 133,000 15,000 193,000 111.54 0.70 Very Zone 49,000 85,000 270,000 15,000 X 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. Print Done X
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1 a Acid Test Ratio Quick assetscurrent liabilities cashshort term investments accounts receivables ... View the full answer
Related Book For
Horngrens Financial and Managerial Accounting The Financial Chapters
ISBN: 978-0134486857
6th edition
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura
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