Judy Snow is considering investing $10,000 and wishes to know which of two following companies offers the

Question:

Judy Snow is considering investing $10,000 and wishes to know which of two following companies offers the better alternative.

Hoffman Company earned net income of $63,000 last year on average total assets of $280,000 and average stockholders’ equity of $210,000. The company’s shares are selling for $100 per share; 6,300 shares of common stock are outstanding.

McMahon Company earned $24,375 last year on average total assets of $125,000 and average stockholders’ equity of $100,000. The company’s common shares are selling for $78 per share; 2,500 shares are outstanding.

Which stock should Snow buy?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...