Assume that you are purchasing stock in a company in the hospital supply industry. You have narrowed the choice to Scott \& White and Pediatric Supply and have assembled the following data:

Your investment strategy is to purchase the stocks of companies that have low price/earnings ratios but appear to be in good shape financially. Assume that you have analyzed all other factors, and your decision depends on the results of the ratio analysis to be performed.
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Compute the following ratios for both companies for the current year and decide which company's stock better fits your investment strategy.
1. Current ratio 2. Acid-test ratio 3. Inventory turnover 4. Days' sales in average receivables 5. Debt ratio 6. Times-interest-earned ratio 7. Return on net sales 8. Return on total assets 9. Return on common stockholders' equity 10. Earnings per share of common stock 11. Book value per share of common stock 12. Price/earnings ratio

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Selected income statement data for current year: Net sales (all on credit). Cost of goods sold. Income from operations. Interest expense Net income. Scott & White Pediatric Supply $519,000 $603,000 387,000 454,000 72,000 93,000 8,000 38,000 56,000 Selected balance sheet and market price data at end of current year: Scott & White Pediatric Supply Current assets: Cash... Short-term investments. $ 39,000 $ 25,000 13,000 6,000 Current receivables, net... Inventories Prepaid expenses. Total current assets 164,000 189,000 183,000 211,000 15,000 19,000 414,000 450,000 Total assets. 938,000 974,000 Total current liabilities 338,000 366,000 Total liabilities. 691,000 667,000 Preferred stock, 4%, $100 par. 25,000 Common stock, $1 par (150,000 shares).. 150,000 $5 par (20,000 shares). 100,000 Total stockholders' equity... 247,000 307,000 Market price per share of common stock.. $47.50 $9