Bob has 50,000 available for medium/long-term investment in the ordinary shares of a company. He is wishing, initially, to minimize his risk. He has identified two companies in the same line of business and has gathered together the following information from their most recent financial statements. Summer plc Winter plc Current market price (per share) 1.20 3.50 Share price (last 52 weeks) high 1.40 3.60 low 0.60 3.20 Dividend per share 10.5p 7.0p Earnings per share 15p 21p Price earnings ratio 8.0 16.7 Return on capital employed 9.3% 4.4% Capital gearing 70% 25% An extract from the statement of financial position shows the following: Property, plant, and equipmentCost m Depreciation m Carrying amount m Summer plc 90 60 30 Winter plc 350 80 270 Bob asks you to help him evaluate both companies from an investor's point of view and to advise him which would be better for his investment

Answer rating: 100% (QA)

To evaluate both companies from an investors point of view we can consider several financial ratios ... View the full answer