Please make an investment memo according to the work below.
- Data table ment and have decided to invest in a company in the digital phone business. You have narrowed the choic c. and have assembled the following data. ata.) Selected balance sheet and market price data at the end of the current year: Data table Better Digital Zone Network Current Assets Cash $ 25,000 $ 19,000 Selected income statement data for the current year: Short-term Investments Accounts Receivables, Net Merchandise Inventory 41,000 35.000 14,000 43,000 Better Digital Zone Network $ 423,035 $ 493,845 211,000 255,000 0 19,000 Net Sales Revenue (all on credit) Cost of Goods Sold Interest Expense Net Income 65,000 97,000 15,000 23,000 Prepaid Expenses $ 189,000 $ 188,000 Total Current Assets 58,000 66,000 Total Assets $ 263,000 $ 326,000 Total Current Liabilities 101,000 95,000 101,000 131,000 Print Done 12,000 Total Liabilities Common Stock: $1 par (12,000 shares) $1 par (14,000 shares) Total Stockholders' Equity Market Price per Share of Common Stock Dividends Paid per Common Share 14,000 both companies. (Round interim and final answers to two decimal places, X.XX.) 162,000 195,000 72.45 113.04 Better Digital 15 Zone Network 24 0.50 0.10 ayout for both companies for the current year. Selected balance sheet data at the beginning of the current year: the dividend payout. Better Digital Zone Network er share - Earnings per share Balance sheet: Accounts Receivables, net $ 42,000 $ 52,000 h companies. (Round interim answers to two decimal places, X.XX, and your final answers to the nearest v Merchandise Inventory 81,000 85,000 Zone Network Better Digital 10 % Total Assets 257 000 27400 2 % stock better fits your investments strategy Print Done fit the investment strategy better. Its price/earnings ratio is lower than that of Zone Network, and Bette Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to Better Digital Corp. and Zone Network, Inc. and have assembled the following data. (Click to view the income statement data.) (Click to view the balance sheet and market price data.) Your strategy is to invest in companies that have low pricelearnings 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. Read the requirements. Requirement 1a. Compute the acid-test ratio for both companies for the current year. Begin by selecting the formula to compute the acid-test ratio. Acid-test ratio = (Cash + Short-term investments + Accounts receivable, net) - Total current liabilities Now, compute the acid-test ratio for both companies. (Round your answers to two decimal places, X.XX.) Better Digital Zone Network Acid-test ratio 1.00 0.80 Requirement 1b. Compute the inventory turnover for both companies for the current year. Begin by selecting the formula to compute the inventory turnover. Inventory turnover = Cost of goods sold - Average merchandise inventory Now, compute the inventory turnover for both companies. (Round your answers to two decimal places, X.XX.) Better Digital 2.89 Zone Network 2.80 Inventory turnover Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to Better Digital Corp. and Zone Network, Inc. and have assembled the following data. (Click to view the income statement data.) (Click to view the balance sheet and market price 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 of ratio analysis. Read the requirements. Requirement 1c. Compute the days' sales in receivables for both companies for the current year. Begin by selecting the formula to compute the days' sales in receivable. Days' sales in receivables = 365 - Accounts receivable turnover ratio Now, compute the days' sales in receivables for both companies. (Round interim calculations to two decimal places and your final answers to the nearest whole day.) Better Digital Zone Network Days' sales in receivables 33 35 Requirement 1d. Compute the debt ratio for both companies for the current year. Begin by selecting the formula to compute the debt ratio. Debt ratio = Total liabilities = Total asset Now, compute the debt ratio for both companies. (Round your answers to the one tenth of a percent, XX%.) Better Digital Zone Network Debt ratio 38.4 % 40.2 % Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to Better Digital Corp. and Zone Network, Inc. and have assembled the following Your strategy is to invest in companies that have low pricelearnings 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. data. Read the requirements. (Click to view the income statement data.) :: (Click to view the balance sheet and market price data.) Requirement 1e. Compute the earnings per share of common stock for both companies for the current year. Begin by selecting the formula to compute the earnings per share of common stock. Earnings per share of common stock (Net income - Preferred dividends) = Weighted average number of common share outstanding Now, compute the earnings per share of common stock for both companies. (Round your answers to the nearest cent.) Better Digital Zone Network Earnings per share of common stock $ 4.83 $ 4.71 Requirement 1f. Compute the price/earnings ratio for both companies for the current year. Begin by selecting the formula to compute the pricelearnings ratio. Price/earnings ratio = Market price per share of common stock - Earnings per share Now, compute the pricelearnings ratio for both companies. (Round interim and final answers to two decimal places, X.XX.) Better Digital Zone Network Price/earnings ratio 15 24 Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to Better Digital Corp. and Zone Network, Inc. and have assembled the following data. E: (Click to view the income statement data.) E: (Click to view the balance sheet and market price data.) Your strategy is to invest in companies that have low pricelearnings 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. Read the requirements. Price/earnings ratio = Market price per share of common stock = Earnings per share Now, compute the price/earnings ratio for both companies. (Round interim and final answers to two decimal places, X.XX.) Better Digital Zone Network Price/earnings ratio 15 24 Requirement 1g. Compute the dividend payout for both companies for the current year. Begin by selecting the formula to compute the dividend payout. Dividend payout = Annual dividend per share = Earnings per share Now, compute the dividend payout for both companies. (Round interim answers to two decimal places, X.XX, and your final answers to the nearest whole percent, X%.) Zone Network Better Digital 10 % Dividend payout 2. % Requirement 2. Decide which company's stock better fits your investments strategy Better Digital's common stock seems to fit the investment strategy better. Its price/earnings ratio is lower than that of Zone Network, and Better Digital appears better shape financially than Zone Network . On the majority of the ratios, Better Digital looks better than Zone Network
