Assume you are purchasing an investment and decide to invest in a company in the home remodeling business. You narrow the choice to Hudson, Inc., or Madison, Corp. You assemble the following selected 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 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.

Requirements
Compute the following ratios for both companies for the current year and decide which company’s stock better fits your investment strategy. Assume all sales are on credit.
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-earnings ratio

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Hudson, Inc. Madison, Corp. Net Sales... $329,000 140,000 83,000 9,000 84,000 $355,000 172,000 98,000 4,000 Cost of Goods Sold EBIT. Interest Expense Net Income 107,000 Hudson, Inc. Madison, Corp. Current Assets: Cash. Short-Term Investments . $ 23,000 29,000 24,000 17,000 6,000 99,000 $ 14,000 41,000 Accounts Receivable, Net. Inventory.. Prepaid Expenses.. Total Current Assets. Total Assets. Total Current Liabilities. 18,000 20,000 3.000 96,000 261,000 80,000 98,000 259,000 67,000 90,000 5,000 Total Liabilities. Common Stock, $1.00 Par, 5,000 Shares. $2.50 Par, 5,000 Shares . 12,500 Total Stockholders' Equity . Market price per share of common stock. $ 60 163,000 169,000 $ 68