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 Best Digital Corp. and Very Zone, Inc. and have assembled the following data.
Selected income statement data for the current year:

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

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.

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Best DigitalVery Zone 493,845 259,000 14,000 72,000 $ 417,925 207,000 Net Sales (all on credit) Cost of Goods Sold Interest Expense Net Income 56,000 Best Digital Very Zone Current Assets: Cash Short-term Investments Accounts Receivable, Net Merchandise Inventory Prepaid Expenses Total Current Assets s23,000 38,000 37,000 65,000 22,000 185,000 261,000 100,000 100,000 12,000 21,000 15,000 47,000 97,000 18,000 198,000 s 325,000 99,000 31,000 Total Assets Total Current Liabilities Total Liabilities Common Stock, $1 par (12,000 shares) $1 par (17,000 shares) Total Stockholders' Equity Market Price per Share of Common Stock70.05 Dividends Paid per Common Share 17,000 194,000 97.52 0.40 161,000 $ 0.60 Best Digita Very Zone Balance Sheet: Accounts Receivable, net Merchandise Inventory Total Assets Common Stock, $1 par (12,000 shares) 42,000 81,000 258,000 12,000 49,000 90,000 275,000 $1 par (17,000 shares) 17,000