Using Ration to Compare Alternative Investment Opportunities

The financial statements for Royale and Cavalier companies are summarized here:

	TCC				DCC
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
Common Stock (par $20)		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
Per share price at end of year	$	18.00			$	27.00
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

Required: 1. Calculate the following ratios for which sufficient information is avaialble. (Round all calculations to two decimal pla Points: Each ratio has 6 points - Question 1 has total 60 points 1. Net Profit Margin 2. Gross Profit Percentage 3. Fixed Asset Turnover 4. Return on Equity 5. Earnings per share 6. Price Earning Ratio 7. Receivables Turnover 8. Days to collect - inventory turnover and Days to sell 9. current ratio 10. Debt-to - assets TIP: To calculate EPS, use the balance in Common Stock to determine the number of shares outstanding. Common sto equals the par value per share times the number of shares. Important information about both Companies: 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. DCC is more conservative, and as its president said, "We avoid what we consider to be undue risk." Both companies use straight-line depreciation, but DCC estimate slightly shorter useful lives than TCC. No shares were issued in the current year and neither company is publicly held. DCC has an annual audit by a CPA, but TCC does not. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account