Discuss the below:
Q: Ryan Company (1st number) Priest Company (2nd number)
Data from the current year-end balance sheets
Assets
Cash- 18500 33000
Accounts receivable, net- 36400 56400
Current notes receivable (trade) 8100 6200
Merchandise Inventory- 83440 131500
Prepaid expenses- 4000 5950
Plant assets, net- 284000 303400
Total Assets- 434440
Liabilities and Equity
Current Liabilities- 60340 92300
Long-term notes payable- 79800 100000
common stock, $5 par value- 175000 205000
retained earnings- 119300 139150
total liabilities and equity- 434440 536450
Data from the current year's income statement
Sales- 660000 780200
Cost of goods sold- 485100 532500
Interest expense- 6900 11000
income tax expense- 12800 19300
net income- 67770 105000
basic earnings per share- 1.94 2.56
Beginning of year balance sheet data
Accounts receivable, net- 28800 53200
Current notes receivable (trade)- 0 0
merchandise inventory- 54600 106400
total assets- 388000 372500
common stock, $5 par value- 175000 205000
retained earnings- 94300 90600
Required
Q1. For both companies computer the
(a) current ratio,
(b) acid-test ratio,
(c) accounts (including notes) receivable turnover,
(d) inventory turnover,
(e) days' sales in inventory, and
(f) days' sales uncollected. Identify the company you consider to be the better short-term credit risk and explain why.
Q2. 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 each company paid cash dividends of $1.50 per share and each company's stock can be purchased at $25 per share, compute their
(e) price-earnings ratios and
(f) dividends yields. Identify which company's stock you would recommend as the better invest and explain why.