Requirement 1. Compute the ratios for both companies for the current year and decide which company's stock better fits your investment strategy. Begin by computing the ratios, starting with the quick (acid-test) ratio. (Abbreviations used: Avg. = average, Cash* = cash and cash equivalents, Mkt = market, o/s = outstanding, SE = stockholders' equity, and ST = short-term.) a. Quick (acid-test) ratio Select the formula and then enter the amounts to calculate the quick (acid-test) ratios. (Round the ratios to two decimal places, X.XX.) ( + + ) / = Quick ratio Authority ( + + ) / = Browse ( + + ) / = b. Inventory turnover Select the formula and then enter the amounts to calculate the inventory turnover for each company. (Round the ratios to two decimal places, X.XX.) / = Inventory turnover Authority / = Browse / = c. Days' sales in average receivables Select the formula and then enter the amounts to calculate days' sales in average receivables for each company. (Use a 365-day year. Round intermediary calculations to the nearest whole number, X. Round your final answers to one decimal place, X.X.) / = Days' sales in average receivables Authority / = Browse / = d. Debt ratio Select the formula and then enter the amounts to calculate the debt ratio for each company. (Enter the debt ratio in decimal form to two decimal places, X.XX.) / = Debt ratio Authority / = Browse / = e.Times-interest-earned ratio Select the formula and then enter the amounts to calculate the times-interest-earned ratio for Browse.(Round the ratio to one decimal place, X.X.) / = Times-interest-earned ratio Browse / = f. Return on commonstockholders' equity Select the formula and then enter the amounts to calculate the return on common stockholders' equity (ROE) for each company. (Complete all answer boxes. If an account has a zero balance, enter a "0". Enter the ROE as a percentage rounded to the nearest one-tenth percent, X.X%.) ( ▼ - ) / = ROE Authority ( - ) / = % Browse ( - ) / = % g. Earnings per share of common stock Select the formula and then enter the amounts to calculate earnings per share (EPS) for each company. (Complete all answer boxes. If an account has a zero balance, enter a "0". Round EPS to two decimal places, X.XX.) ( ▼ - ) / = EPS Authority ( - ) / = Browse ( - ) / = h. Price-earnings ratio Select the formula and then enter the amounts to calculate the price-earnings (P/E) ratio for each company. (Enter amounts in the formula to two decimal places, X.XX, but then round the P/E ratios to one decimal place, X.X, as needed.) ▼ / = P/E ratio Authority / = Browse / = Which company's stock better fits your investmentstrategy? The common stock of ▼ seems to fit the investment strategy better. Its price-earnings ratio is ▼ , and ▼ . Choose from any list or enter any number in the input fields and then continue to the next question.

Transcribed Image Text:

Data Table Data Table Selected balance sheet and market price data at end of current year: Selected income statement data for the current year: Authority 610,000 $ Browse Authority Browse Net sales (all on credit). Cost. of.goods sold Income from operations. 516,000 Current assets: 457,000 94,000 390,000 79,000 10,000 35,000 22,000 S 41,000 13,000 166,000 184,000 Cash Short-term investments 2,000 Interest expense Current receivables, net Net income. 188,000 208,000 64,000 Inventories 19,000 17,000 Prepaid expenses Total current assets Data Table 439,000 421,000 934,000 342,000 695,000 30,000 Total assets 972,000 Total current liabilities 370,000 Selected balance sheet data at beginning of current year: Total liabilities 673,000 Preferred stock, 8%, $150 par Common stock, $1 par (115,000 shares) Authority Browse Balance sheet: 115,000 $ 146,000 S 195,000 196,000 907,000 Current receivables, net $5 par (10,000 shares) Total stockholders' equity Inventories.. 211,000 50,000 239,000 Total assets Long-term debt Preferred stock, 8%, $150 par Common stock, $1 par (115,000 shares) 850,000 299,000 291,000 Market price per share of common stock 30,000 5.60 S 71.72 115,000 - X Requirements $5 par (10,000 shares) Total stockholders' equity. 50,000 216,000 260,000 1. Compute the following ratios for both companies for the current year, and decide which company's stock better fits your investment strategy. a. Quick (acid-test) ratio b. Inventory turnover c. Days' sales in average receivables d. Debt ratio Print Done e. Times-interest-earned ratio f. Return on common stockholders' equity g. Earnings per share of common stock h. Price-earnings ratio Data Table Data Table Selected balance sheet and market price data at end of current year: Selected income statement data for the current year: Authority 610,000 $ Browse Authority Browse Net sales (all on credit). Cost. of.goods sold Income from operations. 516,000 Current assets: 457,000 94,000 390,000 79,000 10,000 35,000 22,000 S 41,000 13,000 166,000 184,000 Cash Short-term investments 2,000 Interest expense Current receivables, net Net income. 188,000 208,000 64,000 Inventories 19,000 17,000 Prepaid expenses Total current assets Data Table 439,000 421,000 934,000 342,000 695,000 30,000 Total assets 972,000 Total current liabilities 370,000 Selected balance sheet data at beginning of current year: Total liabilities 673,000 Preferred stock, 8%, $150 par Common stock, $1 par (115,000 shares) Authority Browse Balance sheet: 115,000 $ 146,000 S 195,000 196,000 907,000 Current receivables, net $5 par (10,000 shares) Total stockholders' equity Inventories.. 211,000 50,000 239,000 Total assets Long-term debt Preferred stock, 8%, $150 par Common stock, $1 par (115,000 shares) 850,000 299,000 291,000 Market price per share of common stock 30,000 5.60 S 71.72 115,000 - X Requirements $5 par (10,000 shares) Total stockholders' equity. 50,000 216,000 260,000 1. Compute the following ratios for both companies for the current year, and decide which company's stock better fits your investment strategy. a. Quick (acid-test) ratio b. Inventory turnover c. Days' sales in average receivables d. Debt ratio Print Done e. Times-interest-earned ratio f. Return on common stockholders' equity g. Earnings per share of common stock h. Price-earnings ratio

Answer rating: 100% (QA)

Solution 1 a Qulck Acld Test Ratlo Cash CurrentReceivables Marketabl eSecurities CurrentLiabil it... View the full answer