50.1K

Verified Solution

Link Copied!

please help with the requirements!

Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to Digital Corp. and Very Zone, Inc. and have assembled the following data. (Click to view the income statement data.) (Click to view the balance sheet and market price data.) 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. Read the requirements. Requirement 1a. Compute the acid-test ratio for both companies for the current year. Begin by selecting the formula to compute the acid-test ratio. Acid-test ratio =( Cash + Short-term investments + Accounts receivable, net ) Total current liabilities Now, compute the acid-test ratio for both companies. (Round your answers to two decimal places, X.XX.) Requirement 1b. Compute the inventory turnover for both companies for the current year. Begin by selecting the formula to compute the inventory turnover. Inventory turnover = Cost of goods sold Average merchandise inventory Now, compute the inventory turnover for both companies. (Round your answers to two decimal places, X.XX.) Data table Selected income statement data for the current year: Selected balance sheet data at the beginning of the current year: Selected balance sheet data at the beginning of the current year: Requirements 1. Compute the following ratios for both companies for the current year: a. Acid-test ratio b. Inventory turnover c. Days' sales in receivables d. Debt ratio e. Earnings per share of common stock f. Price/earnings ratio g. Dividend payout 2. Decide which company's stock better fits your investment strategy

Answer & Explanation Solved by verified expert

See Answer