Is BFI Trading Ltd.s profit performance better or worse than Lin Corp? Explain your reasoning.
Return on Sales Return on Sales BFI Trading Ltd. 82,000.00 1,060,000.00 = 7.74 Lin Corp. 124,000.00 1,246,000.00 = 9.95 Return on Assets Return on Assets 82000 + 40,000 (1,970,000 + 2,070,000) / 2 =6.04 124,000 + 10,000 (1,720,000 + 2,344,000) / 2 =6.59 Return on Common shareholders equity = Return on Common shareholders equity = | 82,000-3000 (500,000+566,000)/2 =79,000 533,000 =14.82 % 124,000-0 (720,000+836,000)/2 =124,000 778,000 =15.94 % Earnings per common share = Earnings per common share = 82,000-3000 10,000 =7.9 124,000-0 75,000 =1.65 Using ratios to decide between two share investments P18-7B 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 BFI Trading Ltd, and .in Corp. and have assembled the following data: Selected income statement data for the year ended December 31, 2020: Nec sales (all on credit) Cost of goods sold Income from operations Interest expense Net income BFI Trading Ltd. $1,060,000 602,000 186,000 40,000 82,000 Lin Corp. $1,246,000 722,000, 202,000 10,000 124,000 Selected balance sheet and market price data for the year ended December 31, 2020: Lin Corp. BFI Trading Ltd. Current assets Cash $ 134,000 Short-term investments 0 Current receivables, net 312,000 - Inventories 424,000 Prepaid expenses 24,000 Total current assets 894,000 Total assets 2,070,000 Total current liabilities 748,000 Total liabilities 1,444,000 Preferred shares, $10.00 (300 shares) 60,000 Common shares (75,000 shares) 960.000 Common shares (10,000 shares) 100,000 Total shareholders' equity 626,000 Market price per common share $ 84.00 BFI's preferred dividends are paid each year. $ 110,000 24,000 392,000 448,000 28,000 1,002,000 2,344,000 800,000 1,508,000 450,000 836,000 55.00 $ Selected balance sheet data at January 1, 2020: BF! Trading Ltd. $ 330,000 448,000 1.970,000 60,000 Lin Corp. $ 280,000 470,000 1,720,000 Current receivables, net Inventories Total assets Preferred shareholders' equity, $10.00 (300 shares) Common shares (75,000 shares) Common shares (10,000 shares) Total shareholders' equity 450,000 100,000 560,000 720,000 Your investment strategy is to purchase the shares of companies that have low price carnings 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 Compute the following ratios (rounded to two decimal places) for both companies for the current year and decide which company's shares better fit your investment strategy: 1094 Part 4 Analysis of Accounting Information
