Assume that you are purchasing shares in a company in the variety store and gas bar supply business. Suppose you have narrowed the choice to Sky Trading Ltd. and Link Corp. and have assembled the following data: (Click the icon to view the income statement data.) Click the icon to view the balance sheet and market price data.) Your investment strategy is to purchase the shares of companies that have low price/earnings ratios but appear to be in good shape financially. Assume you have analyzed all other factors, and your decision depends on the results of the ratio analysis to be performed. Required a. Compute the current ratio for both companies. (Round your answers to two decimal places.) Sky Link Current ratio: b. Compute the acid-test ratio for both companies. (Round your answers to two decimal places.) Sky Link Acid-test ratio: c. Compute the inventory turnover for both companies. (Round interim calculations to the nearest whole dollar and your final answers to two decimal places.) Sky Link Inventory turnover: d. Compute the days' sales in inventory for both companies. (Round all answers to the nearest whole number.) Sky Link Days' sales in inventory: e. Compute the accounts receivable turnover for both companies. (Round interim calculations to the nearest whole dollar and your final answer to two decimal places.) Sky Link Accounts receivable turnover the nearest whole number.) f. Compute the Days' sales in receivables. (Round interim and final answers Sky Link Days' sales in receivables: g. Compute the debt ratio for both companies. (Round your answers to two decimal places.) Sky Link Debt ratio: h. Compute the debt/equity ratio for both companies. (Round your answer to two decimal places.) Sky Link Debt/Equity ratio: i. Compute the times-interest-earned ratio for both companies. (Round your answers to two decimal places.) Sky Link Times-interest-earned ratio: j. Compute the return on net sales for both companies. (Round your answers to two decimal places.) Sky Link Return on net sales: % % k. Compute the return on total assets for both companies. (Round your answers to two decimal places.) Sky Link Return on total assets: % % 1. Compute the return on common shareholders' equity for both companies. (Round your answers to two decimal places.) Sky Link Return on common shareholders' equity: % % m. Compute the earnings per share for both companies. (Round your answers to two decimal places.) Sky Link Earnings per share: n. Compute the pricelearnings ratio for both companies. (Round your answers to two decimal places.) Sky Link Price/earnings ratio: o. Compute the book value per common share for both companies. (Round your answers to two decimal places.) Sky Link Book value per common share: Income statement Selected income statement data for the year ended December 31, 2020 Sky Trading Ltd. Link Corp. Net sales (all on credit) $ 1,060,000 $ 1,246,000 Cost of goods sold 618,000 740,000 Income from operations 200,000 204,000 Interest expense 43,500 13,500 Net income 84,500 142,000 Print Done $ 146,000 $ 0 314,000 424,000 26,000 910,000 $ 120,000 25,500 398,000 456,000 31,500 1,031,000 Current assets: Cash Short-term investments Current receivables, net Inventories Prepaid expenses Total current assets Total assets Total current liabilities Total liabilities Preferred shares, $10.00 (350 shares) Common shares, (75,000 shares) Common shares, (10,000 shares) Total shareholders' equity Market price per common share BA 2,074,000 $ 766,000 1,462,000 62,000 2,356,000 810,000 1,522,000 450,000 100,000 612,000 88.00 $ 834,000 $ 59.00 Selected balance sheet data at January 1, 2020 Link Sky Trading Ltd. 336,000 $ 456,000 1,972,000 62,000 Corp. 298,000 476,000 1,726,000 Current receivables, net Inventories Total assets Preferred shareholders' equity, $10.00 (350 shares) Common shares, (75,000 shares) (10,000 shares) Total shareholders' equity 450,000 100,000 578,000 730,000
