Question
You have won $10,000 in the lottery and you decided to make your first investment ib the stock market. You are considering investing in the
You have won $10,000 in the lottery and you decided to make your first investment ib the stock market. You are considering investing in the Retail sector and is evaluating two competitors Alpha & Beta. Below is a list of selected financial data for the two companies:
| Alpha | Beta |
Current Assets | $60,239 | $17,200 |
Total Assets | $199,581 | $33,440 |
Current Liabilities | $64,619 | $16,540 |
Total Liabilities | $115,970 | $22,597 |
Income Available to Shareholders | $14,694 | $2,377 |
Share Price | $65.39 | $133.58 |
Weighted Average number of Common Shares | 3207 | 430 |
Required
Part a- 4 Marks
For each company calculate and explain briefly the following ratios from a Liquidity, Solvency and Profitability perspective as applicable.
Current Ratio
Debt to Asset Ratio
Basic EPS
Price Earnings Ratio
Part b- 2 Marks
Assuming that both companies have Complex Equity structure what other ratio you will need to calculate to assess the profitability of each company for you as a potential investor . Explain in your own word the implications of that ratio.
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