Summary information from the financial statements of two companies competing in the same industry follows. Required 1.

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


Summary information from the financial statements of two companies competing


Required
1. For both companies compute the
(a) Current ratio,
(b) Acid-test ratio,
(c) Accounts ( including notes) receivable turnover,
(d) Inventory turnover,
(e) Days’ sales in inventory, and
(f) Days’ sales uncollected.
Identify the company you consider to be the better short-term credit risk and explain why. Round to one decimal place.
2. For both companies compute the
(a) Profit margin ratio,
(b) Total asset turnover,
(c) Return on total assets, and
(d) Return on common stockholders’ equity. Assuming that each company paid cash dividends of $ 3.80 per share and each company’s stock can be purchased at $ 75 per share, compute their (e) Price-earnings ratios
(f) Dividend yields. Round to one decimal place. Identify which company’s stock you would recommend as the better investment and explainwhy.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Fundamental accounting principle

ISBN: 978-0078025587

21st edition

Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta

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