Assume you are purchasing an investment and decide to invest in a company in the home remodeling business. You narrow the choice to Build It Right, Inc., or Structurally Sound, Corp. You assemble the following selected data:

Selected income statement data for 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. Inventory turnover

c. Days’ sales in receivables

d. Debt ratio

e. Earnings per share of common stock

f. Price/earnings ratio

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Net Sales (all on credit). Cost of Goods Sold.. Income from Operations Interest Expense. Net Income Build It Right, Inc. Structurally Sound, Corp. $298,000 155,000 83,000 13,000 43,000 $223,000 125,000 47,000 29,000 Selected balance sheet and market price data at the end of the current year follow: Build It Right, Inc. Structurally Sound, Corp. Current Assets: Cash. Short-Term Investments Accounts Receivable, Net. Inventory.. Prepaid Expenses. Total Current Assets. $ 12,000 $ 13,000 11,000 12,000 28,000 25,000 60,000 52,000 2,000 1,000 113,000 103,000 Total Assets. 197,000 159,000 Total Current Liabilities. 59,000 65,000 Total Liabilities.. 79,000 65,000 Preferred Stock, 5%, $100 Par 20,000 Common Stock, $1.00 Par, 6,000 Shares. 6,000 $2.50 Par, 3,000 Shares.. 7,500 Total Stockholders' Equity 118,000 94,000 Market price per share of common stock....... $ 67 $ 31 Selected balance sheet data at the beginning of the current year follow: