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Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the 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 hoice to Digitalized Corp. and Every Zone, Inc. and have assembled the following data. analyzed all other factors and that your decision depends on the results of ratio analysis. (Click to view the income statement data.) Read the requirements (Click to view the balance sheet and market price data.) i Data Table - X 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. Selected balance sheet and market price data at the end of the current year: Acid-test ratio Total current assets = Total current liabilities Digitalized Every Zone Now, compute the acid-test ratio for both companies. (Round your answers to two decimal places, X.XX.) Current Assets: Cash 24,000 $ 17,000 Digitalized Every Zone Short-term Investments 40,000 14,000 Acid-test ratio Accounts Receivables, Net 40,000 48,000 Requirement 1b. Compute the inventory turnover for both companies for the current year. Merchandise Inventory 66,000 97,000 Begin by selecting the formula to compute the inventory turnover Prepaid Expenses 23,000 12.000 nventory turnover = Cost of goods sold = Average merchandise inventory Total Current Assets 193,000 $ 188,000 Now, compute the inventory turnover for both companies. (Round your answers to two decimal place Total Assets 266,000 $ 323,000 i Data Table Digitalized Total Current Liabilities 105,000 96,000 Every Zone Total Liabilities 105,000 128,000 nventory turnover Selected income statement data for the current year: Common Stock Requirement 1c. Compute the days' sales in receivables for both companies for the current year. 12,000 Digitalized Even $1 par (12,000 shares) Begin by selecting the formula to compute the days' sales in receivable. Net Sales Revenue (all on credit) $1 par (17,000 shares) 17,000 $ 123,035 $ Days' sales in receivables = 365 - Accounts receivable turnover ratio 161,000 195,000 Cost of Goods Sold 210,000 Total Stockholders' Equity Market Price per Share of Common Stock 76.50 114.48 Now, compute the days' sales in receivables for both companies. (Round interim calculations to two Interest Expense Dividends Paid per Common Share 1.10 1.00 Digitalized Every Zone Net Income 51,000 Selected balance sheet data at the beginning of the current year Days' sales in receivables Print Done Digitalized Every Zone Requirement 1d. Compute the debt ratio for both companies for the current year. Balance sheet: Begin by selecting the formula to compute the debt ratio. Accounts Receivables, net 41,000 $ 54,000 Debt ratio Total liabilities + Total asset Merchandise Inventory 81,000 87.000 Now, compute the debt ratio for both companies. (Round your answers to the one tenth of a percent, X.X%.) Total Assets 261,000 272,000 Common Stock Digitalized Every Zone $1 par (12,000 shares) 12,000 Debt ratio 1% 1% $1 par (17,000 shares) 17,000 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. Print Done Earnings per share of common stock (Net income - Preferred dividends) = Weighted average number of common share outstanding v Now, compute the earnings per share of common stock for both companies. (Round your answers to the nearest cent.) Digitalized Every Zone Earnings per share of common stock Requirement 1f. Compute the price/earnings ratio for both companies for the current year. Begin by selecting the formula to compute the price/earnings ratio.Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the 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 choice to Digitalized Corp. and Every Zone, Inc. and have assembled the following data. analyzed all other factors and that your decision depends on the results of ratio analysis. (Click to view the income statement data.) Read the requirements. (Click to view the balance sheet and market price data.) i Data Table X 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. Selected balance sheet and market price data at the end of the current year Days' sales in receivables = 365 = Accounts receivable turnover ratio Digitalized Every Zone 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.) Current Assets: Digitalized Every Zone Cash 24,000 $ 17,000 Days' sales in receivables Short-term Investments 40,000 14,000 Accounts Receivables, Net 40,000 48,000 Requirement 1d. Compute the debt ratio for both companies for the current year. Merchandise Inventory 66,000 97.000 Begin by selecting the formula to compute the debt ratio. Prepaid Expenses 23,000 2,000 Debt ratio Total liabilities + Total asset 93,000 $ 188,000 Total Current Assets Now, compute the debt ratio for both companies. (Round your answers to the one tenth of a percent Total Assets 266,000 $ 323,000 i Data Table Digitalized Every Zone Total Current Liabilities 105,000 96,000 Debt ratio % % Total Liabilities 105,000 128,000 Common Stock: Requirement 1e. Compute the earnings per share of common stock for both companies for the curre Selected income statement data for the current year: $1 par (12,000 shares) 12,000 Begin by selecting the formula to compute the earnings per share of common stock Digitalized Every $1 par (17,000 shares) 17,000 423,035 S Earnings per share Net Sales Revenue (all on credit) 161,000 195,000 Cost of Goods Sold 210,000 Total Stockholders' Equity of common stock (Net income - Preferred dividends) = Weighted average number of com Market Price per Share of Common Stock 76.50 114.48 Interest Expense Now, compute the earnings per share of common stock for both companies. (Round your answers to Dividends Paid per Common Share 1.10 1.00 Net Income 51,000 Digitalized Every Zone Selected balance sheet data at the beginning of the current year: Earnings per share of common stock Print Done Digitalized Every Zone Requirement 1f. Compute the price/earnings ratio for both companies for the current year. Balance sheet: Begin by selecting the formula to compute the price/earnings ratio. Accounts Receivables, net 41,000 $ 54,000 Merchandise Inventory 81,000 87,000 Price/earnings ratio Market price per share of common stock = Earnings per share Total Assets 261,000 272,000 Now, compute the price/earnings ratio for both companies. (Round interim and final answers to two decimal places, X.XX.) Common Stock Digitalized Every Zone $1 par (12,000 shares) 12,000 Price/earnings ratio $1 par (17,000 shares) 17,000 Requirement 1g. Compute the dividend payout for both companies for the current year. Begin by selecting the formula to compute the dividend payout. Print Done 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%.) Digitalized Every Zone Dividend payout % Requirement 2. Decide which company's stock better fits your investments strategy. Digitalized's common stock seems to fit the investment strategy better. Its price/earnings ratio is higher than that of Every Zone, | and Digitalized appears in better shape financially than Every Zone . On the majority of the ratios, Digitalized looks better than Every Zone
