P14-38A (similar to) Question Help Assume that you are purchasing an investment and have decided to invest in a company in the smartphone Selected balance sheet and market-price data at the end of the current year follow: business. You have narrowed the choice to Better Digital Electronics or Very Zone Electronics and have : (Click to view the market price data.) assembled the following data. Selected income statement data for the current year follows: (Click to view the income statement data.) Your strategy 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 Selected balance sheet data at the beginning of the current year follow: of ratio analysis. (Click to view the balance sheet data.) Read the requirement. (Enter any percentages as decimals in this format, X.XX. Round your answers to two decimal places.) Better Digital Very Zone a. Acid-test ratio 0 Income statement X Net sales (all on credit) Cost of goods sold Interest expense Net income Better Digital $ 438,000 $ $ 221,000 $ $ 64,800 $ Very Zone 529,250 243,000 18,000 85,000 A Balance sheet and market price data X Current receivables, net Inventories Total assets Common stock: $1 par, (12,000 shares) Common stock: $1 par, (17,000 shares) Better Digital $ 35,000 $ $ 91,500 $ 259,000 $ Very Zone 44,550 78,000 274,000 12,000 $ 17,000 X Balance sheet and market price data Better Digital Very Zone 21,000 22,840 Current assets: Cash Short-term investments Current receivables, net Inventories Prepaid expenses Total current assets Total assets Total current liabilities Total liabilities 29,500 $ 46,920 $ 37,000 $ 71,000 $ 3,580 $ 41,000 102,000 5,160 192,000 188,000 $ 267,500 $ 107,000 $ 107,000 $ 274,000 101,000 137,000 $ Balance sheet and market price data X W 0,JZU V 22,070 37,000 $ 71,000 $ 3,580 $ 41,000 102,000 5,160 $ $ $ SHOT-ler mvestments Current receivables, net Inventories Prepaid expenses Total current assets Total assets Total current liabilities Total liabilities Common stock: $1 par, (12,000 shares) Common stock: $1 par, (17,000 shares) Total stockholders' equity Market price per share of common stock 188,000 $ 267,500 $ 107,000 $ 107,000 $ 12,000 192,000 274,000 101,000 137,000 $ 160,500 $ 89.10 $ 17,000 137,000 90.50 $ X i Requirement Compute the following ratios for both companies for the current year and decide which company's stock better fits your investment strategy. Assume all sales are on credit. a. Acid-test ratio b. Inventory turnover c. Days' sales in average receivables d. Debt ratio e. Gross profit percentage f. Earnings per share of common stock g. Price/earnings ratio