Summary information from the financial statements of two companies competing in the same industry follows. Fargo...

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Summary information from the financial statements of two companies competing in the same industry follows. Fargo Ball Company Company Data from the current year-end balance sheets Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses $ 20,000 $ 36,500 88,700. 79,500 86,800 82,000 9,700 10,100 176,900 252,300 $382,100 $460,400 Plant assets, net Total assets Liabilities and Equity Current liabilities $ 90,500 $ 97,000 Long-term notes payable 93,000 93,300 Common stock, $5 par value 133,000 141,000 Retained earnings 65,600 129,100 Total liabilities and equity $382,100 $460,400 Data from the current year's income statement Sales Cost of goods sold $393,600 $667,500 290,600 480,000 2000 10.300 Merchandise inventory 86,800 82,000 Prepaid expenses 9,700 10,100 Plant assets, net 176,900 252,300 Total assets $382,100 $460,400 Liabilities and Equity Current liabilities $ 90,500 $ 97,000 Long-term notes payable 93,000 93,300 Common stock, $5 par value 133,000 141,000 Retained earnings 65,600 129,100 Total liabilities and equity $382,100 $460,400 Data from the current year's income statement Sales $393,600 $667,500 Cost of goods sold 290,600 480,000 Interest expense 5,900 12,300 Income tax expense 5,700 12,300 Net income 33,850 61,700 Basic earnings per share 1.27 2.19 Beginning-of-year balance sheet data Accounts receivable, net $ 72,200 $ 73,300 Merchandise inventory 105,100 80,500 Total assets 383,400 443,000 Common stock, $5 par value 133,000 141,000 Retained earnings 49,100 109,700 Required 1. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) days' sales in inventory, and () days' sales uncollected. Round to one decimal place. Identify the company you consider to be the better short- term credit risk and explain why. Check (1) Fergo: Accounts receivable turnover, 4.9; Inventory turnover, 3.0 2. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on equity. Assuming that each company paid cash dividends of $1.50 per share and each company's stock can be purchased at $25 per share, compute their (e) price-earnings ratios and () dividend yields. Round to one decimal place; for part b, round to two decimals. Identify which company's stock you would recommend as the better investment and explain why. (2) Ball: Profit margin, 9.2%; PE, 11.4 Page 536 Summary information from the financial statements of two companies competing in the same industry follows. Fargo Ball Company Company Data from the current year-end balance sheets Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses $ 20,000 $ 36,500 88,700. 79,500 86,800 82,000 9,700 10,100 176,900 252,300 $382,100 $460,400 Plant assets, net Total assets Liabilities and Equity Current liabilities $ 90,500 $ 97,000 Long-term notes payable 93,000 93,300 Common stock, $5 par value 133,000 141,000 Retained earnings 65,600 129,100 Total liabilities and equity $382,100 $460,400 Data from the current year's income statement Sales Cost of goods sold $393,600 $667,500 290,600 480,000 2000 10.300 Merchandise inventory 86,800 82,000 Prepaid expenses 9,700 10,100 Plant assets, net 176,900 252,300 Total assets $382,100 $460,400 Liabilities and Equity Current liabilities $ 90,500 $ 97,000 Long-term notes payable 93,000 93,300 Common stock, $5 par value 133,000 141,000 Retained earnings 65,600 129,100 Total liabilities and equity $382,100 $460,400 Data from the current year's income statement Sales $393,600 $667,500 Cost of goods sold 290,600 480,000 Interest expense 5,900 12,300 Income tax expense 5,700 12,300 Net income 33,850 61,700 Basic earnings per share 1.27 2.19 Beginning-of-year balance sheet data Accounts receivable, net $ 72,200 $ 73,300 Merchandise inventory 105,100 80,500 Total assets 383,400 443,000 Common stock, $5 par value 133,000 141,000 Retained earnings 49,100 109,700 Required 1. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) days' sales in inventory, and () days' sales uncollected. Round to one decimal place. Identify the company you consider to be the better short- term credit risk and explain why. Check (1) Fergo: Accounts receivable turnover, 4.9; Inventory turnover, 3.0 2. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on equity. Assuming that each company paid cash dividends of $1.50 per share and each company's stock can be purchased at $25 per share, compute their (e) price-earnings ratios and () dividend yields. Round to one decimal place; for part b, round to two decimals. Identify which company's stock you would recommend as the better investment and explain why. (2) Ball: Profit margin, 9.2%; PE, 11.4 Page 536