Two companies that operate in the same industry as competitors are being evaluated by a bank that may lend money to each one. Summary information from the financial statements of the two companies is provided below:

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1. Calculate current ratios, acid-test ratios, accounts receivable turnovers, merchandise turnovers, and days' sales uncollected for the two companies. Then state which company you think is the better short-term credit risk and why.
2. Calculate profit margins, total asset turnovers, returns on total assets employed, and returns on common stockholders' equity. Assuming that each company paid cash dividends of \(\$ 0.80\) per share and each company's stock can be purchased at \(\$ 18\) per share, calculate price-earnings ratio and dividend yield. Also state which company's stock you would recommend as the better investment and why.

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Cash Accounts receivable. Notes receivable Merchandise inventory. Data from the Current Year-End Balance Sheets Pulser Company $ 27,600 87,100 7,700 102,000 Quaser Company $ 20,200 54,900 9,000 67,200 Prepaid expenses. 7,500 9,700 Plant and equipment, net. 300,700 Total assets. . $459,500 308,600 $542,700 Current liabilities $ 80.800 $110,100 Long-term notes payable. 88,000 102,000 Common stock, $10 par value 160,000 190,000 Retained earnings... 130,700 140,600 Total liabilities and capital $459,500 $542,700 Data from the Current Year's Income Statements Sales $745,000 $969,000 Cost of goods sold 550,000 718,000 Interest expense 8,600 14,900 Income tax expense. 11,200 15,300 Net income. 35,300 44,200 Beginning-of-Year Data Accounts receivable, net. $ 38,200 $ 70,000 Notes receivable -0- Merchandise inventory.. 55,200 -0- 88.400 Total assets. 392,000 468,500 Common stock, $10 par value 160,000 190,000 Retained earnings. 108,200 111,600