Assume that you are purchasing an investment and have decided to invest in a

company in the digital phone business. You have narrowed the choice to Digitalized Corp. and Every Zone, Inc. and have assembled the following data. Selected income statement data for the current year:

Digitalized Every Zone

Net Sales Revenue $($all on credit$)$ $ $423,035$ $ $493,845$ Cost of Goods Sold

Interest Expense Net Income

$210,0000$

$51,000$

$260,00019,00072,000$

Selected balance sheet and market price data at the end of the current year: Digitalized Every Zone

Current Assets: Cash

Short$-$term Investments Accounts Receivable, Net Merchandise Inventory Prepaid Expenses

Total Current Assets Total Assets

Total Current Liabilities Total Liabilities Common Stock:

$$1$ par $(12,000$ shares$)$ $$1$ par $(17,000$ shares$)$

Total Stockholders$$ Equity

Market Price per Share of Common Stock Dividends Paid per Common Share

$ $24,000$ $ $17,00040,00040,00066,00023,000$

$ $193,000$ $ $188,000$

$ $266,000$ $ $323,000105,000105,000$

$12,00017,000$

$161,00076\mathrm{.}501\mathrm{.}10$

$195,000114\mathrm{.}481\mathrm{.}00$

Selected balance sheet data at the beginning of the current year: Digitalized Every Zone

Balance Sheet:

Accounts Receivable, Net Merchandise Inventory

Total Assets Common Stock:

$$1$ par $(12,000$ shares$)$ $$1$ par $(17,000$ shares$)$

$12,00017,000$

$ $41,000$ $ $54,00081,000$

$261,00087,000272,00096,000128,000$

$14,00048,00097,00012,000$Your strategy is to invest in companies that have low price$/$earnings ratios but appear to be in good shape financially. Assume that you have analyzed all other factors and that your decision depends on the results of ratio analysis. Requirements $1.$ Compute the following ratios for both companies for the current year: a$.$ Acid$-$test ratio b$.$ Inventory turnover c$.$ Days$$ sales in receivables d$.$ Debt ratio

e$.$ Earnings per share of common stock

f$.$ Price$/$earnings ratio g$.$ Dividend payout

$2.$ Decide which company$$s stock better fits your investment strategy.