Hello,

I have a couple of follow-up questions to an answer you had provided me on Dec. 7, 2015 @ 6:18 p.m. I have highlighted the two problems that I have questions on in red. I came up with different results than you did and would like to know what I did wrong. I have provided my calculations used.

Thank you for any guidance that you can give me.

Dawnelle Schmidt A375/ACGS3120 Section 01 Intermediate Financial Reporting II-Online-2015 Fall Quarter 12/09/15 Module 10 Problem-Solution - Ratio Analysis Worksheet Before you start: Study the Financial Fact Sheet for Scarlett Company and Gable Company. I. Complete the ratios in the table below for Scarlett Company and Gable Company, based on the financial information in the Fact Sheet. The spaces expand as you type. Ratios Scarlett Company Gable Company 1. 2.36 (24,000+81,100+15,600+ 2.17 (40,500+74,500+13,000+ 90,800+13,700)/95,500 86,000+14,100)/105,000 1.26 (24,000+81,100+15,600) 1.22 (40,500+74,500+13,000) /95,500 /105,000 2. Current Ratio Acid-Test Ratio 3. Accounts (and notes) receivable turnover 4.60 (397,600/ (76,200+81,100+0+15,600/2 )) 4.07 (671,500/ (77,300+74,500+0+13,000/ 2)) 4. Inventory Turnover 2.95 (294,600/ (109,100+90,800/2)) 2.84 (484,000/ (84,500+86,000/2)) 5. Days' sales in inventory 112.52 Days (294,600/90,800) ((1/3.244)*365) 64.85 Days (484,000/86,000) ((1/5.628)*365) 6. Days' sales uncollected 74.45 Days (81,100/397,600)*365 40.50 Days (74,500/671,500)*365 II. Credit risk analysis based on short term: Please identify which company you feel is the better short term credit risk and state your reasons why. Be specific! Details! Gable Company is better. The current ratio and acid-test ratio of Gable Company are less than Scarlett Company, but they are above the ideal ratio of 2 and 1 respectively. Looking into the other ratios accounts receivables of Gable is 9.01 which means it converts its accounts receivables into cash more than 9 times during the period. The inventory turnover ratio is 5.63 it means that they convert their inventory into cash more than 5 times in a year. Day's sales in inventory is low it means they sell their inventory within 64.86 days Day's sales uncollected is low it also indicates high efficiency of Gable Company in collecting its sales. The ratios from no. 3-6 are Copyright 2011 Rasmussen College1 high for Gable Company indicating that the company is better short term credit risk. III. Please complete the second set of factors for Scarlett Company and Gable Company. Note: each company paid a dividend of $3; in addition, the stock of each company can be bought at $25 per share. Factors 7. Profit margin ratio 8. Total asset turnover 9. Return on total assets 10.Price-earnings ratio 11.Dividend yield IV. Scarlett Company Gable Company 9.52% (37,850/397,600) 9.78% (65,700/671,500) 0.98 (397,600/406,100) 1.39 (671,500/484,400) 9.32% (37,850/406,100) 13.56% (65,700/484,400) 12.50 (25/2) 8.33 (25/3) 0.12 (3/25) 0.12 (3/25) Which company do you feel to be the best investment? State your reasons why. Be specific! Details! Gable Company will be the best investment as the profit margin of the company is high. Total assets turnover and return on total assets of the Gable is also high which means the management is using assets more efficiently for earning revenue and net income. It means that in long term the Gable company will provide good returns. The price-earnings ratio of Scarlett company is high it indicates that market is willing to pay more for its stock. But it may change owing to price of share and earnings per share. So looking into the high profit margin and better utilization of assets, in my opinion, Gable company is a better investment Copyright 2011 Rasmussen College2 Module 10 Financial Fact Sheet - Scarlett Company and Gable Company Information from year end balance sheets Scarlett Company Gable Company Assets Cash Accounts Recevables Current Notes Receivables Merchandise Inventory Prepaid Expenses Plant Assets Total Assets $ $ $ $ $ $ $ 24,000.00 81,100.00 15,600.00 90,800.00 13,700.00 180,900.00 406,100.00 $ 40,500.00 $ 74,500.00 $ 13,000.00 $ 86,000.00 $ 14,100.00 $ 256,300.00 $ 484,400.00 Liabilities and Equity Current Liabilites Long Term Notes Payable Common Stock, $10 par Retained Earnings Total Liabilities and Equity $ $ $ $ $ 95,500.00 97,000.00 140,000.00 73,600.00 406,100.00 $ $ $ $ $ 105,000.00 97,300.00 145,000.00 137,100.00 484,400.00 Information from current period income statement Scarlett Company Sales $ 397,600.00 Cost of Goods Sold $ 294,600.00 Interest Expense $ 8,100.00 Income Tax Expense $ 9,700.00 Net Income $ 37,850.00 EPS, Basic $ 2.00 Gable Company $ 671,500.00 $ 484,000.00 $ 14,400.00 $ 16,300.00 $ 65,700.00 $ 3.00 Beginning of the year balances Accoutns Receivables Current Notes Receivables Merchandise Inventory Total Assets Common Stock, $10 par Retained Earnings $ $ $ $ $ $ $ $ $ $ $ $ 76,200.00 109,100.00 387,400.00 137,000.00 53,100.00 77,300.00 84,500.00 447,000.00 145,000.00 113,700.00