Assume that you are considering purchasing stock as an investment. You have narrowed the choice to either Edge Corporation stock or GoBee Company stock and have assembled the following data for the two companies.

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 strategy is to invest in companies that have low price-earnings ratios but appear to be in good shape financially. Assume that you have analyzed all other factors and that your decision depends on the results of your ratio analysis.

Requirements

1. Calculate the following ratios for both companies for the current year, and decide which company’s stock better fits your investment strategy.

a. Quick (acid-test) ratio

b. Inventory turnover

c. Days’ sales in average receivables

d. Debt ratio

e. Times-interest-earned ratio

f. Return on common stockholders’ equity

g. Earnings per share of common stock

h. Price-earnings ratio

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Edge GoBee Net sales (all on credit).. Cost of goods sold. . Income from operations Interest expense. Net income.... $524,000 388,000 $595,000 452,000 73,000 13,000 36,000 89,000 69,000 Edge GoBee Current assets: Cash . $ 21,000 $ 35,000 Short-term investments 4,000 18,000 Current receivables, net 186,000 167,000 Inventories. 212,000 181,000 Prepaid expenses.. 17,000 9,000 Total current assets 440,000 410,000 Total asset assets... 985,000 930,000 Total current liabilities . 368,000 333,000 Total liabilities 663,000 689,000 ........ Preferred stock, 5%, $125 par. Common stock, $1 par (150,000 shares). . 25,000 150,000 $5 par (20,000 shares)... 100,000 Total stockholders' equity 322,000 241,000 Market price per share of common stock 5.52 $ 38.28