Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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 Digital Corp. and Very Network Inc. and have assembled the folowing 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 . Data Table Requirement 1a. Compute the acid-test ratio for both companies for the current year. Begin by selecting the fomula to compute the acid-test ratio. Selected balance sheet and market price data at the end of the current year: Acid-lest ratio Digital Very Network Current Assos: Cash S 21,000 i Data Table Requirements 24,000 S 41,000 37,000 64,000 20,000 186,000 $ 19,000 44.000 101,000 14.000 Selected income statement data for the current year: S 199,000 $ S Digital Very Network 416,430 S 496,035 211,000 257,000 0 15,000 50,000 74,000 Net Sales Revenue (all on credit) Cost of Goods Sold Interest Expense Net Income 1. Compute the following ratios for both companies for the current year. a. Acid-test ratio b. Inventory tumover C. Days' sales in receivables d. Debtralia e. Earnings per share of common stock f. Price earnings rato g. Dividend payout 2. Decide which company's stock belter fits your investment strategy S Total Short-term Investments Accounts Receivables, Net Merchandise Inventory Prepaid Expenses Total Current Asset Total Assets al Current Liabilities Total Liabilities Common Stock $1 per (10,000 shares) $1 par (15,000 shares) Total Stockholders' Equity Market Price per Share of Common Stock Dividends Paid per Common Share 265,000 S 101,000 101,000 328,000 98,000 129,000 10,000 Print Done Print Done 164,000 15,000 197,000 123.25 0.90 90.00 1.10 Selected balance sheet data at the beginning of the current year: Choose from any drop-down list and then click Check Answer Digital Very Network Balance sheet: parts 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 Digital Corp. and Very Network Inc. and have assembled the folowing 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 . Data Table Requirement 1a. Compute the acid-test ratio for both companies for the current year. Begin by selecting the fomula to compute the acid-test ratio. Selected balance sheet and market price data at the end of the current year: Acid-lest ratio Digital Very Network Current Assos: Cash S 21,000 i Data Table Requirements 24,000 S 41,000 37,000 64,000 20,000 186,000 $ 19,000 44.000 101,000 14.000 Selected income statement data for the current year: S 199,000 $ S Digital Very Network 416,430 S 496,035 211,000 257,000 0 15,000 50,000 74,000 Net Sales Revenue (all on credit) Cost of Goods Sold Interest Expense Net Income 1. Compute the following ratios for both companies for the current year. a. Acid-test ratio b. Inventory tumover C. Days' sales in receivables d. Debtralia e. Earnings per share of common stock f. Price earnings rato g. Dividend payout 2. Decide which company's stock belter fits your investment strategy S Total Short-term Investments Accounts Receivables, Net Merchandise Inventory Prepaid Expenses Total Current Asset Total Assets al Current Liabilities Total Liabilities Common Stock $1 per (10,000 shares) $1 par (15,000 shares) Total Stockholders' Equity Market Price per Share of Common Stock Dividends Paid per Common Share 265,000 S 101,000 101,000 328,000 98,000 129,000 10,000 Print Done Print Done 164,000 15,000 197,000 123.25 0.90 90.00 1.10 Selected balance sheet data at the beginning of the current year: Choose from any drop-down list and then click Check Answer Digital Very Network Balance sheet: parts

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Money, Markets And Capital The Case For A Monetary Analysis

Authors: Jean Cartelier

1st Edition

0815355777, 9780815355779

More Books

Students also viewed these Accounting questions

Question

what is the Difference Between IAS 17 and IFRS 16

Answered: 1 week ago