Question

CLASS: Using Financial Ratios

	LX Inc.	Rose Co
Current assets:
Cash	$ 29,200	$ 20,500
Short-term investments	42,000	22,200
Current receivables, net	38,000	44,000
Inventories	67,000	105,000
Prepaid expenses	2,000	4,300
Total current assets	$178,200	$196,000
Total assets	$300,000	$272,000
Total current liabilities	$105,000	$102,000
Total liabilities	$105,000	$136,000
Common stock:
$1 par (10,000 shares)	$ 10,000
$1 par (14,000 shares)		$ 14,000
Total stockholders’ equity	$195,000	$136,000
Total Liabilities and S/E	$300,000	$272,000
Market price per share	$  80.00	$  85.10
Your strategy is to invest in companies that have low price/earnings ratios but appear to be in good shape financially.
Assume that you have analyzed all other factors and that your decision depends on the results of ratio analysis.
Compute the following ratios for both companies for the current year and decide which company’s stock better fits your investment strategy.
a. Acid-test ratio
b. Inventory turnover
c. Days’ sales in average receivables
d. Debt ratio
e. Earnings per share of common stock
f. Price/earnings ratio	This is all that was provided.

Answer 1

Particular	formula	Lx	Rose
Current liabilities	a	105000	102000
Current assets	b	178200	196000
Inventories	c	67000	105000
Prepaid expenses	d	2000	4300
Liquid assets	e=b-c-d	109200	85700
Assets test ratio	f=e÷a	1.04:1	0.84:1
Total liabilities and s/e	g	300000	272000
Shareholders equity	h	195000	136000
Debt	i=g-h-a	0	34000
Debt ratio	j=i÷total liabilities	N.A	0.25:1

Other ratio can not be calculated as details of profit and loss statement is missing..for other ratio we need sales and earnings information from statement of profit and loss.