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. Balance sheet Cash Accounts receivable (net) Inventory Property & equipment (net) Other assets Total assets Current liabilities Long-term debt (interest rate: 15%) Capital stock ($10 par value) Blue Water Prime Fish $ 41,500 40,500 $ 20,500 32,500 96,500 147,500 84,500 $ 410,500 $ 96,500 68,500 151,500 29,500 64,500 43,000 407,000 310,000 $ 813,000 $ 56,500 61,000 517,000 106,500 72,000 $ 813,000 $ 797,000 (400,500) (311,500) $ 85,000 Additional paid-in capital Retained earnings Total liabilities and stockholders' equity $ 410,500 Income statement Sales revenue (1/2 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 $ 439,500 (238,500) (162,000) $ 39,000 $ 22.5 45% Dividends declared and paid in current year $ 33,500 $ 20 45% $ 150,500 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. Required: 1. Using year-end balances for all ratios, compute the following ratios: Note: 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 Profitability ratios: 1. Return on equity ratio 2. Return on assets ratio 3. Gross profit margin 4. Net profit margin ratio 5. Earnings per share ratio Asset turnover ratios: 6. Total asset turnover ratio 7. Fixed asset turnover ratio 8. Receivable turnover ratio 9. Inventory turnover ratio Liquidity ratios: 10. Current ratio 11. Quick ratio 12. Cash ratio Solvency ratios: 13. Debt to equity ratio Market ratios: BLUE WATER COMPANY PRIME FISH COMPANY % % % % % % % % 14. Price earnings ratio 15. Dividend yield ratio % %