Assume you are purchasing an investment and have decided to invest in a company in the home renovation business. Suppose you have narrowed the choice to BildRite Ltd. And Highbuild Homes Ltd. You have assembled the following selected data: Selected income statement data for current year

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

Selected balance sheet data at beginning of current year

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.
Required
Compute the following ratios for both companies for the current year and decide which
company’s shares better fits your investment strategy:
a. Current ratio                                             g. Return on net sales
b. Acid-test ratio                                           h. Return on total assets
c. Inventory turnover                                   i. Return on common shareholders’ equity
d. Day’s sales in average receivables        j. Earnings per common share
e. Debt ratio                                                  k. Book value per common share
f. Times-interest-earned ratio                    l. Price/earnings ratio

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Highbuild BildRite Ltd. Homes Ltd. $231,875 154,250 48,750 Net sales (all on credit) $323,050 187,700 89,500 15,000 70,000 Cost of goods sold Interest expense 2,500 Net income 36,550 BildRite Ltd Highbuild Homes Ltd. Current assets: Cash Short-term investments Current receivables, net $ 17,250 11,500 32,300 60,950 2,000 $ 18,500 9,750 26,100 55,775 1,250 $111,375 $169,000 43,500 68,500 Prepaid expenses Total current assets Total assets Total current liabilities Total liabilities Preferred shares: $3.00 (250 shares) Common shares (4,000 shares) Common shares (7,000 shares) Total shareholders' equity $225,000 66,750 97,500 12,500 15,000 17,500 127,500 s 10.00 100,500 Market price per common share $ 10.00 Highbuild $ 16,000 52,500 192,500 BildRite Ltd Homes Ltd. Current receivables, net Inventories Total assets Preferred shareholders' equity, $3.00 (250 shares) Common shares (4,000 shares) Common shares (7,000 shares) Total shareholders' equity S 30,250 52,500 240,000 15,000 17,500 90,000 87,500