Two companies competing in the same industry are being evaluated by a bank that can lend CASE 1–3 money to only one of them. Summary information from the financial statements of the two companies follows:

Datatech Sigma Datatech Sigma Company Company Company Company Data from the current year-end balance sheet: Data from the current year’s income statement:

Assets . . . . . . . . . . . . . . . . . . . Sales . . . . . . . . . . . . . . . . . . . $660,000 $780,200 Cash . . . . . . . . . . . . . . . . . . . . $ 18,500 $ 33,000 Cost of goods sold . . . . . . . . . 485,100 532,500 Accounts receivable, net . . . . . 36,400 56,400 Interest expense . . . . . . . . . . 6,900 11,000 Notes receivable (trade) . . . . . 8,100 6,200 Income tax expense . . . . . . . . 12,800 19,300 Merchandise inventory . . . . . . 83,440 131,500 Net income . . . . . . . . . . . . . . 67,770 105,000 Prepaid expenses . . . . . . . . . . 4,000 5,950 Basic earnings per share . . . . 1.94 2.56 Plant and equipment, net . . . . 284,000 303,400 Total assets . . . . . . . . . . . . . . . $434,440 $536,450