Ratio analysis Selected data for Ernsmeyer Company for 2011 and additional information on industry averages follow.

Required
a. Calculate and compare Ernsmeyer Company€™s ratios with the industry averages.
b. Discuss factors you would consider in deciding whether to invest in the company.

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$ 168,000 $ 560,000 684,000 480,000 Earnings (net income) Preferred stock (16,000 shares at $35 par, 6%) Common stock (40,500 shares no par, market value $52) Retained earnings 1,724,000 Less: Treasury stock Preferred (1,000 shares) Common (500 shares) $28,800 41,600 $1,682,400 12,800 Total stockholders' equity Industry averages Earnings per share Price-earnings ratio Return on equity $2.00 8.00 7.30%