Please complete the ratios for the following two companies: 1-current ratio, 2-acid test ratio, 3-accounts which includes notes receivable turnover, 4-inventory turnover, 5-days sales in inventory, 6-

Please complete the ratios for the following two companies: 1-current ratio, 2-acid test ratio, 3-accounts which includes notes receivable turnover, 4-inventory turnover, 5-days sales in inventory, 6-days sales uncollected. Please then identify which company you would feel to the better short term credit risk and state your reasons why.

Please complete the ratios for the following two companies: 1-profit margin ratio, 2-total asset turnover, 3-return on total assets. Each company then paid a dividend of $3 and as well the stock of each company can be bought at $25 per share, so with this information then compute 4-price earnings ratio and then dividend yields for both. Please then address which company you feel to be the best investment and state your reasons why.

Attachment 1

Attachment 2

ATTACHMENT PREVIEW

Download attachment

Module 10 Problem-Solution – Ratio
Analysis
Worksheet
Before you start:
 Study the Financial Fact Sheet for Scarlett Company and Gable Company. 
I.
Complete the ratios in the table below for Scarlett Company and Gable Company, based on 
the financial information in the Fact Sheet. The spaces expand as you type.
Ratios
Scarlett Company
Gable Company
1.
Current Ratio
2.
Acid-Test Ratio
3.
Accounts (and 
notes) receivable 
turnover
4.
Inventory Turnover
5.
Days’ sales in 
inventory
6.
Days’ sales 
uncollected
II.
Credit risk analysis based on short term:
 Please identify which company you feel is the 
better short term credit risk and state your reasons why. Be specific! Details!

Unlock Solution Unlocking…

III.
Please complete the second set of factors for Scarlett Company and Gable Company. 
Note

each company paid a dividend of $3; in addition, the stock of each company can be bought at 
$25 per share.
Factors
Scarlett Company
Gable Company
7.
Profit margin ratio
8.
Total asset turnover
9.
Return on total 
assets
10.
Price-earnings ratio
11.
Dividend yield 
IV.
Which company do you feel to be the best investment? State your reasons why. Be specific! 
Details!

ATTACHMENT PREVIEW

Download attachment

Module 10 Financial Fact Sheet – Scarlett Company and Gable Company
Information from year end balance sheets
Information from current period income statement
Scarlett Company
Gable Company
Scarlett Company
Gable Company
Assets
Sales
$397,600.00
$671,500.00
Cash
$24,000.00
$40,500.00
Cost of Goods Sold
$294,600.00
$484,000.00
Accounts Recevables
$81,100.00
$74,500.00
Interest Expense
$8,100.00
$14,400.00
Current Notes Receivables
$15,600.00
$13,000.00
Income Tax Expense
$9,700.00
$16,300.00
Merchandise Inventory
$90,800.00
$86,000.00
Net Income
$37,850.00
$65,700.00
Prepaid Expenses
$13,700.00
$14,100.00
EPS, Basic
$2.00
$3.00
Plant Assets
$180,900.00
$256,300.00
Total Assets
$406,100.00
$484,400.00
Liabilities and Equity
Beginning of the year balances
Current Liabilites
$95,500.00
$105,000.00
Accoutns Receivables
$76,200.00
$77,300.00
Long Term Notes Payable
$97,000.00
$97,300.00
Current Notes Receivables
$-
$-
Common Stock, $10 par
$140,000.00
$145,000.00
Merchandise Inventory
$109,100.00
$84,500.00
Retained Earnings
$73,600.00
$137,100.00
Total Assets
$387,400.00
$447,000.00
Total Liabilities and Equity
$406,100.00
$484,400.00
Common Stock, $10 par
$137,000.00
$145,000.00
Retained Earnings
$53,100.00
$113,700.00

Leave a Comment