Your Problem-Solution assignment for this module is to conduct a ratio analysis of two different companies.

First click the following linked Financial Fact Sheet to view the financial information for Scarlett Company and Gable Company. The fact sheet contains the accounting details you need to complete this problem-solution assignment.

Financial Fact sheet - Scarlett Company / Gable Company

1. Please complete the ratios for the following two companies: 1-current ratio, 2-acid test ratio, 3-accounts which includes notes receivable turnover, 4-inventory turnover, 5-days sales in inventory, 6-days sales uncollected. Please then identify which company you would feel to the better short term credit risk and state your reasons why.
2. Please complete the ratios for the following two companies: 1-profit margin ratio, 2-total asset turnover, 3-return on total assets. Each company then paid a dividend of $3 and as well the stock of each company can be bought at $25 per share, so with this information then compute 4-price earnings ratio and then dividend yields for both. Please then address which company you feel to be the best investment and state your reasons why.

Now click the following worksheet and save it to your computer to work on. Follow the instructions in the worksheet. When you have completed your calculations and answers, submit the worksheet as an attached document.

Module 10 Problem Solution - Ratio Analysis Worksheet

Module 10 Problem-Solution - Ratio Analysis Worksheet Before you start: Study the Financial Fact Sheet for Scarlett Company and Gable Company. I. Complete the ratios in the table below for Scarlett Company and Gable Company, based on the financial information in the Fact Sheet. The spaces expand as you type. Ratios Scarlett Company 1. Current Ratio 2. Acid-Test Ratio 3. Accounts (and notes) receivable turnover 4. Inventory Turnover 5. Days' sales in inventory 6. Gable Company Days' sales uncollected II. Credit risk analysis based on short term: Please identify which company you feel is the better short term credit risk and state your reasons why. Be specific! Details! Copyright 2011 Rasmussen College 1 III. Please complete the second set of factors for Scarlett Company and Gable Company. Note: each company paid a dividend of $3; in addition, the stock of each company can be bought at $25 per share. Factors 7. Profit margin ratio 8. Total asset turnover 9. Return on total assets 10.Price-earnings ratio 11.Dividend yield IV. Scarlett Company Gable Company Which company do you feel to be the best investment? State your reasons why. Be specific! Details! Copyright 2011 Rasmussen College 2 Module 10 Financial Fact Sheet - Scarlett Company and Gable Company Information from year end balance sheets Scarlett Company Gable Company Assets Cash Accounts Recevables Current Notes Receivables Merchandise Inventory Prepaid Expenses Plant Assets Total Assets $ $ $ $ $ $ $ 24,000.00 81,100.00 15,600.00 90,800.00 13,700.00 180,900.00 406,100.00 $ 40,500.00 $ 74,500.00 $ 13,000.00 $ 86,000.00 $ 14,100.00 $ 256,300.00 $ 484,400.00 Liabilities and Equity Current Liabilites Long Term Notes Payable Common Stock, $10 par Retained Earnings Total Liabilities and Equity $ $ $ $ $ 95,500.00 97,000.00 140,000.00 73,600.00 406,100.00 $ $ $ $ $ 105,000.00 97,300.00 145,000.00 137,100.00 484,400.00 Information from current period income statement Scarlett Company Sales $ 397,600.00 Cost of Goods Sold $ 294,600.00 Interest Expense $ 8,100.00 Income Tax Expense $ 9,700.00 Net Income $ 37,850.00 EPS, Basic $ 2.00 Gable Company $ 671,500.00 $ 484,000.00 $ 14,400.00 $ 16,300.00 $ 65,700.00 $ 3.00 Beginning of the year balances Accoutns Receivables Current Notes Receivables Merchandise Inventory Total Assets Common Stock, $10 par Retained Earnings $ $ $ $ $ $ $ $ $ $ $ $ 76,200.00 109,100.00 387,400.00 137,000.00 53,100.00 77,300.00 84,500.00 447,000.00 145,000.00 113,700.00