P13-4 (Algo) Computing Ratios and Comparing Alternative Investment Opportunities LO 13-3, 13-4, 13-5, 13-6, 13-7, 13-8 The current year financial statements for Blue Water Company and Prime Fish Company are presented below. Blue Water Prime Fish Balance sheet: Cash Accounts receivable (net) Inventory Property & equipment (net) Other assets Total assets Current liabilities Long-term debt (interest rate: 10%) Capital stock ($10 par value) Additional paid-in capital Retained earnings Total liabilities and stockholders' equity Income statement: Sales revenue (1/3 on credit) Cost of goods sold Operating expenses Net income Other data: Per share stock price at end of current year Average income tax rate Dividends declared and paid in current year $ 41,200 39,000 98,000 143,000 84,200 $ 405,400 $ 98,000 66,400 149,400 29, 200 62,400 $ 405,400 $ 20,800 31,600 41,200 403,400 307,000 $ 804,000 $ 52,000 60,400 514,000 106,200 71,400 $ 804,000 $ 444,000 (240,000) (161,400) $ 42,600 $ 800,000 (400,200) (311,200) $ 88,600 $ 22.2 30% $ 33,200 $ 17 30% $ 149,000 Both companies are in the fish catching and manufacturing business. Both have been in business approximately 10 years, and each has had steady growth. The management of each has a different viewpoint in many respects. Blue Water is more conservative, and as its president has said, "We avoid what we consider to be undue risk." Neither company is publicly held. 1. Complete a schedule that reflects a ratio analysis of each company. (Round your intermediate calculations and final answers to 2 decimal places. Enter percentage answers rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) Ratio BLUE WATER COMPANY PRIME FISH COMPANY Profitability ratios: 1. Return on equity % % 2. Return on assets % % % % % % 3. Gross profit percentage 4. Net profit margin 5. Earnings per share 6. Quality of income Asset turnover ratios: 7 Total asset turnover 1.10 1.00 8. Fixed asset turnover 3.10 1.98 9. Receivable turnover 3.79 8.44 2.45 9.71 10. Inventory turnover Liquidity ratios: 11 Current ratio 1.82 1.80 12 Quick ratio 0.82 1.01 0.42 0.40 13. Cash ratio Solvency ratios: 14. Times interest earned ratio 15. Cash coverage ratio 16. Debt/equity ratio Market ratios: 17 Price/earnings ratio 18. Dividend yield ratio 0.68 0.16 10.01% 17.05%