Assume that you are considering purchasing stock as an investment. You have narrowed the choice to DVR.com and Express Shops and have assembled the following data.
Selected income statement data for the current year:

Selected balance sheet and market price data at end of current year:

Selected balance sheet data at beginning of current year:

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 and decide which company's stock better fits your investment strategy.
a. Acid-test ratio
b. Inventory turnover
c. Days sales in average receivables
d. Debt ratio
e. Times-interest-earned ratio
f. Return on common stockholders equity
g. Earnings per share of common stock
h. Price/earnings ratio
2. Compute each company€™s economic-value-added (EVA) measure and determine whether the companies EVA s confirm or alter your investment decision. Each company€™s cost of capital is10%.

Transcribed Image Text:

DVR Express Net sales (all on credit)$602,000 $517,000 Cost of goods sold....449,000 382,000 Income from operations88,000 73,000 16,000 61,000 39,000 Interest expense Net income.. DVR Current assets: S 22,000 38,000 10,000 14,000 182,000 167,000 210,000 181,000 Prepaid expenses...21,0008,000 45,000 408,000 981,000 935,000 362,000 333,000 673,000 700,000 30,000 Short-term investments Current receivables, net Total current assets Total a Total current liabilities Total liabilities Preferred stock, 5%, $150 par Common stock, $1 par (100,000 s 100,000 S5 par (15,000 shares Total stockholders' equity Market price per share of common stockS 6.10 75,000 235,000 55.00 308,000 DVRExpress Balance sheet: $144,000 Inventories Total assets Long-term deb Preferred stock, 5%, $150 par Common stock, $1 par (100,000 shares 205,000 199,000 .. .. 853,000 908,000 ー 299,000 30,000 100,000 $5 par (15,000 shares 75,000 260,000 221,000 Total stockholders' equity ………