Suppose that you are considering investing in one of two companies, each in the same industry. The most recent income statements for each company and other relevant information are as follows:

Required:
1. Compute the following for each company:
a. Earnings per share
b. Dividend yield ratio
c. Dividend payout ratio
d. Price-earnings ratio
e. Return on total assets
f. Return on common equity
2. In which of the two companies would you invest?Explain.

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Income Statements (in thousands) Less Cost of goods sold Less Selling and admin istrative expenses (1,000) Income before taxes 0 Net income Less Dividends Ending retained eamings Average total assets $10,000,000 $13,000,000 1 Average common shares Average preferred shares Market price per common share For both Company A and Company 8, the preferred dvidend is $1 per share.