deteriorated during 2018 and (b) whether the investment attractiveness of its com- mon stock appears to have increased or decreased P15-35B Using ratios to decide between two stock investments 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 All Digital Corp and Green Zone, Inc. and have assembled the following data. Selected income statement data for the current year: C. All Digital Green Zone Cost of Goods Sold Interest Expense Net Income Net Sales Revenue (all on credit) 417,925 $493,115 209,000 258,000 14,000 72,000 58,000 100 852 chapter 15 Seleczed balance shect and market price data at dof the current yoar Green Zone All Digital Current Amets s 23000 s 18.000 37,00017,000 Short-term Investments Accounts Recehvable, Net 49,000 Merchandse Inventory 102,000 64,000 21,000 Prepaid Expenses Total Current Assets Total Assets Total Current Liabilities Total Liabilities Common Stock: 17,000 $ 184,000 $203,000 5 263,000 326,000 105,000 105,000 99,000 134,000 1 par (10,000 shares) 10,000 $2 par (14,000 shares) Total Stockholders' Equity 28,000 158,000 192,000 92.801230 Market Price per Share of Common Stock 128.50 0.90 Dividends Paid per Common Share 1.20 Selected balance sheet data at the begiening of the current year: All Digital Green Zone Balance Sheet: Accounts Receivable, Net Merchandise Inventory Total Assets Common Stock: 41,000 $54 000 89,000 81,000 258,000 277,000 $1 par (10,000 shares) 52 par (14,000 shares) 10,000 28,000 Your stratcgy is to invest in companies that have low price/earnings 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 Requirements 1. Compute the following ratios for both companies for the current year: a. Acid-test ratio b. Inventory turnover c. Days' sales in reccivables d. Debt ratio e. Earnings per share of common stock f. Price/carnings ratio g Dividend payout 2. Decide which company's stock better fits your investment strategy