Locate the Case 1-3: Comparative Analysis, Credit and Equity on page 61 of your text. Be...

 

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Locate the Case 1-3: Comparative Analysis, Credit and Equity on page 61 of your text. Be sure to submit thoughtful and substantial answers to the questions following the case regarding the two companies analyzed. Provide the following information to the management team deciding on which bank stock to select: 1. Compute the current ratio, acid test ratio, accounts receivable turnover, inventory turnover, days' sales in inventory, and days' sales in receivables ratios for both companies. 2. Identify by this analysis the company that you consider the better short-term credit risk and explain why. 3. Compute the net profit margin, total asset turnover, return on total assets, and return on common stockholders' equity for both companies. 4. Assume each company paid a cash dividend of $1.50 per share and that each company's stock can be purchased at $25 a share. Compute each company's price- earnings ratio and dividend yield. 5. Identify which company's stock you would recommend as the better investment and explain why. CASE 1-3 Comparative Analysis: Credit and Equity Analysis Two companies competing in the same industry are being evaluated by a bank that can lend money to only one of them. Summary information from the financial statements of the two companies follows: Two companies competing in the same industry are being evaluated by a bank that can lend money to only one of them. Summary information from the financial statements of the two companies follows: Datatech Sigma Datatech Sigma Company Company Company Company Data from the current year-end balance shet: Data from the current year's income statement $660,000 $780,200 532.500 Assets Sales $ 18,500 $ 33,000 Cost of goods sold. 56,400 Interest expense 6,200 Income tax expense Cash 485,100 Accounts receivable, net 36,400 6,900 11,000 Notes receivable (trade) 8,100 12,800 19,300 Merchandise inventory Prерaid expenses Plant and equipment, not 83,440 131,500 Net income 67,770 105,000 4,000 5,950 Basic earnings per share.. 1.94 2.56 284,000 303,400 Total assets $434,440 $536,450 Datatech Sigma Datatech Sigma Company Company Company Company Page 62 Beginaing-of-year data Liabilities and Stockholders' Equity $ 28,800 $ 53,200 Accounts receivable, net $ 60,340 $ 92,300 Notes receivabie (trade). Merchandise inventory. Current liablities. Long-term notes payable Common stock, $5 par value.. Retained eamings . 79,800 175,000 100,000 205,000 51,600 106,400 Total assets 372,500 388,000 175,000 94,300 119,300 139,150 Common stock, $5 par value 205,000 90,600 Total liabilities and equity $434,440 $536,450 Retained earnings Locate the Case 1-3: Comparative Analysis, Credit and Equity on page 61 of your text. Be sure to submit thoughtful and substantial answers to the questions following the case regarding the two companies analyzed. Provide the following information to the management team deciding on which bank stock to select: 1. Compute the current ratio, acid test ratio, accounts receivable turnover, inventory turnover, days' sales in inventory, and days' sales in receivables ratios for both companies. 2. Identify by this analysis the company that you consider the better short-term credit risk and explain why. 3. Compute the net profit margin, total asset turnover, return on total assets, and return on common stockholders' equity for both companies. 4. Assume each company paid a cash dividend of $1.50 per share and that each company's stock can be purchased at $25 a share. Compute each company's price- earnings ratio and dividend yield. 5. Identify which company's stock you would recommend as the better investment and explain why. CASE 1-3 Comparative Analysis: Credit and Equity Analysis Two companies competing in the same industry are being evaluated by a bank that can lend money to only one of them. Summary information from the financial statements of the two companies follows: Two companies competing in the same industry are being evaluated by a bank that can lend money to only one of them. Summary information from the financial statements of the two companies follows: Datatech Sigma Datatech Sigma Company Company Company Company Data from the current year-end balance shet: Data from the current year's income statement $660,000 $780,200 532.500 Assets Sales $ 18,500 $ 33,000 Cost of goods sold. 56,400 Interest expense 6,200 Income tax expense Cash 485,100 Accounts receivable, net 36,400 6,900 11,000 Notes receivable (trade) 8,100 12,800 19,300 Merchandise inventory Prерaid expenses Plant and equipment, not 83,440 131,500 Net income 67,770 105,000 4,000 5,950 Basic earnings per share.. 1.94 2.56 284,000 303,400 Total assets $434,440 $536,450 Datatech Sigma Datatech Sigma Company Company Company Company Page 62 Beginaing-of-year data Liabilities and Stockholders' Equity $ 28,800 $ 53,200 Accounts receivable, net $ 60,340 $ 92,300 Notes receivabie (trade). Merchandise inventory. Current liablities. Long-term notes payable Common stock, $5 par value.. Retained eamings . 79,800 175,000 100,000 205,000 51,600 106,400 Total assets 372,500 388,000 175,000 94,300 119,300 139,150 Common stock, $5 par value 205,000 90,600 Total liabilities and equity $434,440 $536,450 Retained earnings

Answer rating: 100% (QA)

current ratio current assets current liabilities datatech company sigma company cash 18500 33000 accounts receivable 36400 56400 notes receivable 8100 ... View the full answer