PIT-28A Using ratios to decide between two stock investments Asame that you are purchasing pany in the digital phone business. You have narrowed the choice to Digitalized Corp an investment and have decided to invest in a com and Every Zone, Inc. and have assembled the following data. Selected income statement data for the current year Digitalized Every Zone Net Sales Revenue (all on credit) $ 423,035 $ 493,845 Cost of Goods Sold 210,000 260,000 Interest Expense 10 19,000 Net Income 51,000 72,000 Selected balance sheet and market price data at the end of the current vear Digitalized Every Zone Current Assets Cash $ 24,000 $ 17,000 Short-term Investments Accounts Receivable, Net Merchandise Inventory 40,000 14,000 40,000 48,000 66,000 97,000 Prepaid Expenses 23,000 12,000 Total Current Assets $ 193,000 $ 188,000 S 266,000 Total Assets $323,000 Total Current Liabilities 105,000 96,000 105,000 128,000 Total Liabilities Common Stock $1 par (12,000 shares) $1 par (17,000 shares) Total Stockholders' Equity 12,000 17,000 195,000 161,000 114.48 76.50 Market Price per Share of Common Stock Dividends Paid per Common Share 1.00 1.10 Selected balance sheet data at the beginning of the current year: Every Zone Digitalized Balance Sheet: $ 54,000 $ 41,000 Accounts Receivable, net Merchandise Inventory 87,000 272,000 81,000 261,000 Total Assets Common Stock: $1 par (12,000 shares) 12,000 17,000 $1 par (17,000 shares) 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 ad that your decision depends on the results of ratio analysis. Requirements 1. Compute the following ratios for both companies for the current year Earnings per share of common a. Acid-test ratio . stock b. Inventory turnover f. Price/earnings ratio g Dividend payout Days' sales in receivables . d. Debt ratio 2. Decide which company's stock better fits your investment strategy