Mel Filbert is considering an investment in the common stock of a chain of retail department stores. She has narrowed her choice to two retail companies, Single Corporation and Design Corporation, whose income statements and balance sheets follow.

During the year, Single paid a total of $50,000 in dividends. The market price per share of its stock is currently $60. In comparison, Design paid a total of $114,000 in dividends, and the current market price of its stock is $76 per share. Single had net cash flows from operations of $271,500 and net capital expenditures of $625,000. Design had net cash flows from operations of $492,500 and net capital expenditures of $1,050,000. Information for prior years is not readily available. Assume that all notes payable are current liabilities and all bonds payable are long-term liabilities and that there is no change in inventory.

Required
Conduct a comprehensive ratio analysis for each company, using the available information. Compare the results. (Round to one decimal place, and consider changes of 0.1 or less to be indeterminate.)
1. Prepare an operating asset management analysis by calculating for each company the (a) Current ratio,
(b) Quick ratio,
(c) Receivables turnover,
(d) Days€™ sales uncollected,
(e) Inventory turnover,
(f) Days€™ inventory on hand,
(g) Payables turnover,
(h) Days€™ payable,
(i) Financing period.
2. Prepare a profitability and total asset management analysis by calculating for each company the
(a) profit margin,
(b) Asset turnover,
(c) Return on assets.
3. Prepare a financial risk analysis by calculating for each company the
(a) Debt to equity ratio,
(b) Return on equity,
(c) Interest coverage ratio.
4. Prepare a liquidity analysis by calculating for each company the
(a) Cash flow yield,
(b) Cash flows to sales,
(c) Cash flows to assets,
(d) Free cash flow.
5. Prepare an analysis of market strength by calculating for each company the
(a) Price/earnings (P/E) ratio
(b) Dividend yield.
6. Compare the two companies by inserting the ratio calculations from 1 through 5 in a table with the following column headings: Ratio Name, Single, Design, and Company with More Favorable Ratio. Indicate in the last column which company had the more favorable ratio in each case.
7. How could the analysis be improved if information about these companies€™ prior years wereavailable?

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Income Statements Single Design $12,560,000 $25,210,000 Net sales Costs and expenses: Cost of goods sold 6,142,000 4,822,600 986,000 $11,950,600 609,400 194,000 S 415,400 200,000 $215400 4.31 $14,834,000 7,108,200 2,434,000 $24,376,200 833,800 228,000 S 605,800 300,000 S 305,800 S 10.19 Selling expenses Administrative expenses Total costs and expenses Income from operations Interest expense Income before income taxes Income taxes expense Net income Earnings per share Balance Sheets Single Design Assets Cash Marketable securities (at cost) Accounts receivable (net) Inventory Prepaid expenses Property, plant, and equipment (net) Intangibles and other assets Total assets S 80,000 203,400 552,800 629,800 54,400 2,913,600 553,200 $4,987,200 192,400 84,600 985,400 ,253A00 114,000 6,552,000 144,800 9,326,600 Accounts payable Notes payable Income taxes payable Bonds payable Common stock, $20 par value Additional paid-in capital Retained earnings Total liabilities and stockholders' equity Liabilities and Stockholders' Equity 344,000 150,000 50,200 2,000,000 1,000,000 609,800 833,200 $4,987,200 S 572,600 400,000 73,400 2,000,000 600,000 3,568,600 2,112,000 $9,326,600