Assume that you are purchasing shares in a company in the variety store and gas bar supply business. Suppose you
Assume that you are purchasing shares in a company in the variety store and gas bar supply business. Suppose you have narrowed the choice to BFI Trading Ltd. and Lin Corp. and have assembled the following data: Selected income statement data for the year ended December 31, 2017:
Selected balance sheet and market price data for the year ended December 31, 2017:
Selected balance sheet data at January 1, 2017:
Your investment strategy is to purchase the shares of companies that have low price- earnings ratios but appear to be in good shape financially. Assume you have analyzed all other factors, and your decision depends on the results of the ratio analysis to be performed.
Compute the following ratios for both companies for the current year and decide which company's shares better fit your investment strategy:
a. Current ratio
b. Acid-test ratio
c. Inventory turnover
d. Days' sales in receivables
e. Debt ratio
f. Times-interest-earned ratio
g. Return on net sales
h. Return on total assets
i. Return on common shareholders' equity
j. Earnings per common share
k. Book value per common share
l. 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...
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