Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Perform financial analysis and make an investment decision Assume that you are purchasing an investment and have decided to invest in a company in the

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Perform financial analysis and make an investment decision Assume that you are purchasing an investment and have decided to invest in a company in the smartphone business. You have narrowed the choice to Digital Plus Electronics or Speed Network Electronics and have assembled the following data. Selected income statement data for the current year follow: \begin{tabular}{|l|c|c|} \hline & Digital Plus & Speed Network \\ \hline$1 par (10,000 shares ) & $10,000 & \\ \hline$1 par (14,000 shares ) & & $14,000 \\ \hline \end{tabular} Selected balance sheet and market-price data at the end of the current year follow: \begin{tabular}{|c|c|c|} \hline & Digital Plus & Speed Network \\ \hline Total current liabilities & $109,000 & $104,000 \\ \hline Total liabilities & $109,000 & $139,000 \\ \hline Common stock: & & \\ \hline$1 par (10,000 shares ) & $10,000 & \\ \hline$1 par (14,000 shares ) & & $14,000 \\ \hline Total stockholders' equity & $327,000 & $295,375 \\ \hline Market price per share of common stock & $73.50 & $81.90 \\ \hline \end{tabular} 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 of ratio analysis. 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. Return on sales g. Earnings per share of common stock h. Price/earnings ratio

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting A Managerial Emphasis

Authors: Charles T Horngren

6th Edition

0131795082, 978-0131795082

More Books

Students also viewed these Accounting questions

Question

5. Explain the supervisors role in safety.

Answered: 1 week ago