Assume you are purchasing an investment and decide to invest in a company in the home remodeling business. You narrow the choice to Sky-view, Inc., or Vista Corp. You assemble the following selected data. Assume all sales are on credit. 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 priceearnings 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
1. 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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Madison, Corp. Hudson, Inc. Net Sales. .. Cost of Goods Sold. EBIT . . Interest Expense Net Income $329,000 140,000 $355,000 172,000 98,000 4,000 107,000 83,000 9,000 84,000 Hudson, Inc. Madison, Corp. Current Assets: $ 14,000 Cash . Short-Term Investments .. Accounts Receivable, Net... $ 23,000 29,000 24,000 17,000 6.000 99,000 41,000 18,000 20,000 3,000 96,000 259,000 67,000 90,000 5,000 Inventory. Prepaid Expenses... Total Current Assets... 261,000 80,000 Total Assets Total Current Liabilities. Total Liabilities... 98,000 Common Stock, S1.00 Par, 5,000 Shares.. $2.50 Par, 5,000 Shares... 12,500 163,000 Total Stockholders' Equity . . Market price per share of common stock.. 169,000 68 60