Your strategy is to invest in companies that have low pricelearnings ratios but appear to be in good shape financially.

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Your Strategy Is To Invest In Companies That Have Low Pricelearnings Ratios But Appear To Be In Good Shape Financially 1 (184.29 KiB) Viewed 50 times

Your strategy is to invest in companies that have low pricelearnings 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. 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 Digitized Corp. and Zone Network, Inc. and have assembled the following data. (Click to view the income statement data.) Click to view the balance sheet and market price data.) Read the requirements. Х Data table ... Selected balance sheet and market price data at the end of the current year: 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. Digitized Zone Network Current Assets: Acid-test ratio Cash $ 25,000 $ 20,000 43,000 14,000 Short-term Investments Accounts Receivables, Net 49,000 Requirements Data table 39,000 65,000 Merchandise Inventory 96,000 Prepaid Expenses 21,000 16,000 Selected income statement data for the current year: $ 193,000 $ 195,000 Total Current Assets a. Total Assets $ 265,000 $ 327,000 Net Sales Revenue (all on credit) $ C. Digitized Zone Network 416,830 $ 493,845 212,000 256,000 Total Current Liabilities 100,000 1. Compute the following ratios for both companies for the current year: Acid-test ratio b. Inventory turnover Days' sales in receivables d. Debt ratio Earnings per share of common stock f. Pricelearnings ratio g. Dividend payout 2. Decide which company's stock better fits your investment strategy. 99,000 Cost of Goods Sold 100,000 130,000 e. Interest Expense 0 15,000 Total Liabilities Common Stock: Net Income 49,000 76,000 10,000 34,000 $1 par (10,000 shares) $2 par (17,000 shares) Total Stockholders' Equity Market Price per Share of Common Stock Dividends Paid per Common Share 197,000 165,000 68.60 Print Done 111.75 Print Done 0.80 0.60 Selected balance sheet data at the beginning of the current year: Digitized Zone Network Balance sheet: Accounts Receivables.net $ 43.000 $ 54.000 Help me solve this Demodocs example Get more help Print Done