CP$13-6($Static$)$ Using Ratios to Compare Alternative Investment Opportunities $[$LO $13-4,$ LO $13-5,$ LO $13-6]$

The financial statements for Armstrong and Blair companies are summarized here:

Armstrong Company Blair Company

Balance Sheet

Cash $ $35,000$ $ $22,000$

Accounts Receivable, Net $40,00030,000$

Inventory $100,00040,000$

Equipment, Net $180,000300,000$

Other Assets $45,000408,000$

Total Assets $ $400,000$ $ $800,000$

Current Liabilities $ $100,000$ $ $50,000$

Notes Payable $($long$-$term$)60,000370,000$

Total Liabilities $160,000420,000$

Common Stock $($par $$10)150,000200,000$

Additional Paid$-$in Capital $30,000110,000$

Retained Earnings $60,00070,000$

Total Liabilities and Stockholders$$ Equity $ $400,000$ $ $800,000$

Income Statement

Sales Revenue $ $450,000$ $ $810,000$

Cost of Goods Sold $245,000405,000$

Other Expenses $160,000315,000$

Net Income $ $45,000$ $ $90,000$

Other Data

Estimated value of each share at end of year $ $18$ $ $27$

Selected Data from Previous Year

Accounts Receivable, Net $ $20,000$ $ $38,000$

Inventory $92,00045,000$

Equipment, Net $180,000300,000$

Notes Payable $($long$-$term$)60,00070,000$

Total Stockholders$$ Equity $231,000440,000$

The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately $10$ years and each has had steady growth. Despite these similarities, the management of each has a different viewpoint in many respects. Blair is more conservative, and as its president said, $$We avoid what we consider to be undue risk.$$ Both companies use straight$-$line depreciation, but Blair estimates slightly shorter useful lives than Armstrong. No shares were issued in the current year and neither company is publicly held. Blair Company has an annual audit by a CPA, but Armstrong Company does not. Assume the end$-$of$-$year total assets and net equipment balances approximate the year$$s average and all sales are on account.

Required:

Calculate the following ratios. TIP: To calculate EPS, use the balance in Common Stock to determine the number of shares outstanding. Common Stock equals the par value per share times the number of shares. $($Use $365$ days in a year. Do not round intermediate calculations and round your final answers to $2$ decimal places.$)$