Assume you are purchasing an investment and decide to invest in a company in the home remodeling business. You narrow the choice to Here To Stay, Inc., or Dream Home, Corp. You assemble the following selected data. Assume all sales on credit. Selected income statement data for the current year follow:

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

Selected balance sheet data at the beginning of the current year follow:

Your investment strategy is to purchase the stock of the company that has a low price/earnings ratio but appears to be in good shape financially. Assume that you analyzed all other factors and your decision depends on the results of the ratio analysis to be performed.

Requirement
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 ratio
b. Debt ratio
c. Interest coverage ratio
d. Accounts receivable turnover
e. Inventory turnover
f. Total asset turnover
g. Return on assets
h. Return on equity
i. Earnings per share
j. Price earningsratio

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Here To Stay, Inc. Dream Home, Corp. Net Sales Cost of Goods Sold EBIT Interest Expense Net Income $395,000 155,000 83,000 13,000 43,000 $333,000 125,000 63,000 11,000 49,000 Here To Stay, Inc Dream Home, Corp Current Assets: S 12,000 Short-Term Investments....11,000 28,000 60,000 1.000 13,000 12.000 25,000 52,000 1.000 103,000 189,000 65,000 74,000 6,000 Cash Inventory Prepaid Expenses Total Current Assets.17 Total Assets Total Current Liabilities.... Total Liabilities Common Stock, $1.00 Par, 6,000 Shares... 197,000 59,000 75,000 $2.50 Par 3,000 Shares 7,500 122,000 Market price per share of common stock..... S 45 ... Total Stockholders' Equity 115,000 $ 35 Dream Home, Corp nventory Total Assets Common Stock, $1.00 Par, 6,000 Shares Here To Stay, Inc. S 29,000 53,000 162,000 S 24,000 56,000 155,000 6,000 $2.50 Par, 3,000 Shares7,500 Total Stockholders' Equity 79,000 118,000