Problem 17-5A Comparative ratio analysis LO A1, P3
[The following information applies to the questions
Summary information from the financial statements of two companies competing in the same industry follows.
|Data from the current year-end balance sheets||Data from the current year’s income statement|
|Cash||$||18,000||$||34,000||Cost of goods sold||596,100||650,500|
|Accounts receivable, net||37,400||56,400||Interest expense||7,700||17,000|
|Current notes receivable (trade)||9,500||7,400||Income tax expense||15,377||25,183|
|Merchandise inventory||84,540||138,500||Net income||180,823||219,517|
|Prepaid expenses||5,800||7,150||Basic earnings per share||5.32||4.46|
|Plant assets, net||350,000||304,400||Cash dividends per share||3.81||3.92|
|Beginning-of-year balance sheet data|
|Liabilities and Equity||Accounts receivable, net||$||31,800||$||53,200|
|Current liabilities||$||71,340||$||93,300||Current notes receivable (trade)||0||0|
|Long-term notes payable||85,800||99,000||Merchandise inventory||63,600||117,400|
|Common stock, $5 par value||170,000||246,000||Total assets||428,000||412,500|
|Retained earnings||178,100||109,550||Common stock, $5 par value||170,000||246,000|
|Total liabilities and equity||$||505,240||$||547,850||Retained earnings||126,817||82,897|
Problem 17-5 Part 2
2a. For both companies compute the (a)
profit margin ratio, (b) total asset turnover,
(c) return on total assets, and (d) return on
common stockholders’ equity. Assuming that share and each company’s
stock can be purchased at $105 per share, compute their
(e) price-earnings ratios and (f) dividend
yields. (Do not round intermediate calculations. Round your
answers to 2 decimal places.)
2b. Identify which company’s stock you would recommend as the better investment.
For both companies compute the profit margin ratio.
For both companies compute the total asset turnover
For both companies compute the return on total assets.
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