Problem 13-5B Comparative ratio analysis P3 Summary information from the financial statements of two companies competing in the same industry follows. Ball Fargo Company Ball Company Fargo Company Company Data from the current year-end balance sheets Data from the current year's income statement Assets Sales.... $393,600 $667,500 Cash. $ 20,000 $ 36,500 Cost of goods sold.. 290,600 480,000 Accounts receivable, net . 88,700 79,500 Interest expense... 5,900 12,300 Merchandise inventory.. 86,800 82,000 Income tax expense 5,700 12,300 Prepaid expenses. 9,700 10,100 Not income 33,850 61,700 Plant assets, net.. 176,900 252,300 Basic earnings per share.. 1.27 2.19 Total assets... $382,100 $460,400 Liabilities and Equity Beginning-of-year balance sheet data Current liabilities... $ 90,500 $ 97,000 Accounts receivable, net... $ 72,200 105,100 $ 73,300 80,500 Long-term notes payable. 93,000 93,300 Merchandise inventory.. Common stock, $5 par value.. 133,000 141,000 Total assets 383,400 443,000 Retained earnings.. 65,600 133,000 141,000 129,100 $460,400 Common stock, $5 par value Retained earnings.. Total liabilities and equity.. $382,100 49,100 109,700 Required 1. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) days' sales in inventory, and (f) days' sales uncollected. Round to one decimal place. Identify the company you consider to be the better short-term credit risk and explain why. 2. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on equity. Assuming that each company paid cash dividends of $1.50 per share and each company's stock can be purchased at $25 per share, compute their (e) price-earnings ratios and (f) dividend yields. Round to one decimal place; for part b, round to two decimals. Identify which company's stock you would recommend as the better investment and explain why