1 2 3 Data from the current year end balance sheet: Data from the current year's income statement: 4 5 Fargo Ball Fargo Ball 6 ASSETS Sales 393,600 667,500 7 Cash 20,000 36,500 Cost of Goods Sold 290,600 480,000 8 Accounts receivable, net 88,700 79,500 Gross profit 103,000 187,500 9 Inventory 86,800 82,000 Operating expenses 57,550 101,200 10 Prepaid expenses 9,700 10,100 Interest Expense 5,900 12,300 11 Plant assets, net 176,900 252,300 Income tax expense 5,700 12,300 12 TOTAL ASSETS 382,100 460,400 Net Income 33,850 61,700 13 Basic earnings per share $ 1.27 $ 2.19 14 LIABILITIES AND EQUITY 15 Current liabilities 90,500 97,000 Beginning of year balance sheet data: 16 Long-term notes payable 93,000 93,300 Accounts receivable, net 72,200 73,300 17 Common stock, $5 par value 18 Retained Earnings 19 TOTAL LIABILITIES AND EQUITY 133,000 141,000 65,600 382,100 460,400 Inventory 105,100 80,500 129,100 Total assets 383,400 443,000 20 Common stock, $5 par value Retained Earnings 133,000 141,000 49,100 109,700 21 Requirements: 1. For both companies compute the (a) current ratio, (b) acid test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) days' sales in inventory and (f) days' sales uncollected Round to one decimal point and show all work. Identify the company you consider the better short-term credit risk and explain why. 2. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets and (d) return on equity. Assuming that each company paid cash dividends of $1.50 per share and that each company's stock can be purchased for $25 per share, compute their (e) price to earnings ratios and (f) dividend yields. Round to one decimal point and show all work. Indentify which 22 company's stock you would recommend as the better investment and explain why. 23