Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to Better Digital Corp. and Very Network, Inc. and have assembled the following data. (Click to view the income statement data.) (Click to view the balance sheet and market price data.) Your strategy is to invest in companies that have low pricelearnings 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 ratio analysis. Read the requirements. Requirement 1e. Compute the earnings per share of common stock for both companies for the current year. Begin by selecting the formula to compute the earnings per share of common stock. Earnings per share of common stock = Now, compute the earnings per share of common stock for both companies. (Round your answers to the nearest cent.) Better Digital Very Network Earnings per share of common stock Requirement 1. Compute the pricelearnings ratio for both companies for the current year. Begin by selecting the formula to compute the pricelearnings ratio. Pricelearnings ratio = Now, compute the pricelearnings ratio for both companies. (Round interim and final answers to two decimal places, X.XX.) Better Digital Very Network Pricelearnings ratio Requirement 1g. Compute the dividend payout for both companies for the current year. Begin by selecting the formula to compute the dividend payout. Dividend payout = Now, compute the dividend payout for both companies. (Round interim answers to two decimal places, X.XX, and your final answers to the nearest whole percent, X%.) Better Digital Very Network Dividend payout % % Requirement 2. Decide which company's stock better fits your investments strategy. common stock seems to fit the investment strategy better. Its pricelearnings ratio is and On the majority of the ratios, Data Table Selected income statement data for the current year: Better Digital Very Network $ 416,830 $ 497,860 Net Sales Revenue (all on credit) Cost of Goods Sold 209,000 255,000 Interest Expense 0 18,000 Net Income 62,000 66,000 Selected balance sheet and market price data at the end of the current year: Better Digital Very Network Current Assets: Cash $ 22,000 23,000 $ 37,000 Short-term Investments 16,000 47,000 Accounts Receivables, Net Merchandise Inventory 36,000 64,000 19,000 101,000 15,000 Prepaid Expenses $ 179,000 $ 201,000 Total Current Assets Total Assets $ 263,000 $ 325,000 Total Current Liabilities 103,000 96,000 Total Liabilities 103,000 128,000 Common Stock: 12,000 28,000 $1 par (12,000 shares) $2 par (14,000 shares) Total Stockholders' Equity Market Price per Share of Common Stock 160,000 197,000 77.55 117.75 Dividends Paid per Common Share 0.70 0.40 Selected balance sheet data at the beginning of the current year: Selected balance sheet data at the beginning of the current year: Better Digital Very Network Balance sheet: Accounts Receivables, net $ 43,000 $ 52,000 Merchandise Inventory 82,000 86,000 Total Assets 257,000 272,000 Common Stock: 12,000 $1 par (12,000 shares) $2 par (14,000 shares) 28,000 1. Compute the following ratios for both companies for the current year: a. Acid-test ratio b. Inventory turnover Days' sales in receivables d. Debt ratio e. Earnings per share of common stock f. Pricelearnings ratio g. Dividend payout 2. Decide which company's stock better fits your investment strategy
