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:

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

Selected balance sheet data at the beginning of the 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:
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.

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Digitalized Every Zone Net Sales Revenue (all on credit) $ 423,035 $ 493,845 Cost of Goods Sold 260,000 19,000 210,000 Interest Expense 51,000 Net Income 72,000 Digitalized Every Zone Current Assets: Cash $ 24,000 $ 17,000 Short-term Investments 40,000 14,000 Accounts Receivable, Net 40,000 48,000 Merchandise Inventory 66,000 97,000 Prepaid Expenses 23,000 12,000 Total Current Assets $ 193,000 $ 188,000 Total Assets $ 266,000 $ 323,000 Total Current Liabilities 105,000 96,000 Total Liabilities 105,000 128,000 Common Stock: $1 par (12,000 shares) $1 par (17,000 shares) 12,000 17,000 Total Stockholders' Equity 161,000 195,000 Market Price per Share of Common Stock 76.50 114.48 Dividends Paid per Common Share 1.10 1.00