The financial statements for Armstrong and Blair companies are summarized here:

	Armstrong Company			Blair Company
Balance Sheet
Cash	$	35,000		$	22,000
Accounts Receivable, Net		40,000			30,000
Inventory		100,000			40,000
Equipment, Net		180,000			300,000
Other Assets		45,000			408,000
Total Assets	$	400,000		$	800,000
Current Liabilities	$	100,000		$	50,000
Note Payable (long-term)		60,000			370,000
Total Liabilities		160,000			420,000
Common Stock (par $10)		150,000			200,000
Additional Paid-in Capital		30,000			110,000
Retained Earnings		60,000			70,000
Total Liabilities and Stockholders Equity	$	400,000		$	800,000
Income Statement
Sales Revenue	$	450,000		$	810,000
Cost of Goods Sold		245,000			405,000
Other Expenses		160,000			315,000
Net Income	$	45,000		$	90,000
Other Data
Estimated value of each share at end of year	$	18		$	27
Selected Data from Previous Year
Accounts Receivable, Net	$	20,000		$	38,000
Inventory		92,000			45,000
Equipment, Net		180,000			300,000
Note Payable (long-term)		60,000			70,000
Total Stockholders Equity		231,000			440,000

The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years and each has had steady growth. Despite these similarities, the management of each has a different viewpoint in many respects. Blair is more conservative, and as its president said, We avoid what we consider to be undue risk. Both companies use straight-line depreciation, but Blair estimates slightly shorter useful lives than Armstrong. No shares were issued in the current year and neither company is publicly held. Blair Company has an annual audit by a CPA, but Armstrong Company does not. Assume the end-of-year total assets and net equipment balances approximate the years average and all sales are on account.

Required:

1.

Calculate the following ratios. TIP: To calculate EPS, use the balance in Common Stock to determine the number of shares outstanding. Common Stock equals the par value per share times the number of shares. (Use 365 days in a year. Do not round intermediate calculations and round your final answers to 2 decimal places.)

2. A venture capitalist is considering buying shares in one of the two companies. Based on the data given, prepare a comparative written evaluation of the ratio analyses (and any other available information) and conclude with your recommended choice.

TIP: Comment on how accounting differences affect your evaluations, if at all.

Ratio		Armstrong Company		Blair Company
Tests of Profitability:
1.	Net Profit Margin	10.00	%	11.11	%
2.	Gross Profit Percentage	45.56	%	50.00	%
3.	Fixed Asset Turnover	2.50		2.70
4.	Return on Equity	?	%	?	%
5.	Earnings per Share	$3.00		$4.50
6.	Price/Earnings Ratio	6.00		6.00
Tests of Liquidity:
7.	Receivables Turnover	?		?
	Days to Collect	?		?
8.	Inventory Turnover	?		?
	Days to Sell	?		?
9.	Current Ratio	1.75		1.84
Tests of Solvency:
10.	Debt-to-Assets	?		?