PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Q17 fx C E 1 Two companies competing in the same industry are being evaluated by a bank that can lend money to 2 only one of them. Summary information from the financial statements of the two companies follows: G H. K M Rowland Pierce Rowland Pierce Company Data from the current year-end balance sheets: Company Company Data from the current year's income statements: Company Assets Cash 19.500 34,000 Sales 770,000 880.200 Accounts Rec, net 37,400 57,400 Cost of Goods sold 585.100 632.500 Current note receivable Mdse Inventory Prepaid expenses 9.100 7,200 Interest Expense Income tax expense 7.900 13,000 84,440 132,500 14,800 24.300 5,000 6,950 Net income 162,200 210,400 Plant assets, net 290.000 Common shares outstanding 304,400 36,000 41,200 Total assets 445.440 542,450 Beginning of year balance sheet data: Accounts Receivable, net Liabilities and Equity 29.800 54.200 Current liabilities 61,340 93,300 Current Notes Receivable LT Notes Payable 80.800 101.000 Mdse Inventory 55,600 107.400 Common stock, $5 par value 180,000 206.000 Plant assets, net 287.100 178,900 Retained Earnings Total liabilities and equity 123,300 142,150 Total Assets 398,000 382,500 445.440 542,450 Common Stock 180,000 206.000 Retained Earnings 98,300 93,600 Required: 1 For both companies compute: a. Current ratio d. Net Assets b. Accounts Receivable turnover (includes notes) e. Debt ratio c. Inventory turnover f. Times Interest Earned
PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Q17 fx C E 1 Two companies competing in the same industry are being evaluated by a bank that can lend money to 2 only one of them. Summary information from the financial statements of the two companies follows: G H. K M Rowland Pierce Rowland Pierce Company Data from the current year-end balance sheets: Company Company Data from the current year's income statements: Company Assets Cash 19.500 34,000 Sales 770,000 880.200 Accounts Rec, net 37,400 57,400 Cost of Goods sold 585.100 632.500 Current note receivable Mdse Inventory Prepaid expenses 9.100 7,200 Interest Expense Income tax expense 7.900 13,000 84,440 132,500 14,800 24.300 5,000 6,950 Net income 162,200 210,400 Plant assets, net 290.000 Common shares outstanding 304,400 36,000 41,200 Total assets 445.440 542,450 Beginning of year balance sheet data: Accounts Receivable, net Liabilities and Equity 29.800 54.200 Current liabilities 61,340 93,300 Current Notes Receivable LT Notes Payable 80.800 101.000 Mdse Inventory 55,600 107.400 Common stock, $5 par value 180,000 206.000 Plant assets, net 287.100 178,900 Retained Earnings Total liabilities and equity 123,300 142,150 Total Assets 398,000 382,500 445.440 542,450 Common Stock 180,000 206.000 Retained Earnings 98,300 93,600 Required: 1 For both companies compute: a. Current ratio d. Net Assets b. Accounts Receivable turnover (includes notes) e. Debt ratio c. Inventory turnover f. Times Interest Earned
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Two companies competing in the same industry are being evaluated by a bank that can lend money to
2 only one of them. Summary information from the financial statements of the two companies follows:
1
3.
4.
Rowland
Pierce
Rowland
Pierce
Company
6 Data from the current year-end balance sheets:
Company
Company
Data from the current year's income statements:
Company
7
8 Assets
9 Cash
10 Accounts Rec, net
19,500
34,000
Sales
770,000
880.200
37,400
57,400
Cost of Goods sold
585,100
632.500
11 Current note receivable
2 Mdse Inventory
3 Prepaid expenses
4 Plant assets, net
9,100
7,200
Interest Expense
7,900
13,000
84,440
132,500
Income tax expense
14,800
24.300
5,000
6,950
Net income
162,200
210,400
290,000
304,400
Common shares outstanding
36,000
41,200
5 Total assets
445,440
542,450
Beginning of year balance sheet data:
7Liabilities and Equity
3 Current liabilities
9LT Notes Payable
O Common stock, $5 par value
Retained Earnings
Total liabilities and equity
Accounts Receivable, net
29,800
54,200
61,340
93,300
Current Notes Receivable
80,800
101,000
Mdse Inventory
55,600
107,400
180,000
206,000
Plant assets, net
287,100
178,900
123,300
142,150
Total Assets
398,000
382,500
445,440
542,450
Common Stock
180,000
206,000
Retained Earnings
98,300
93,600
Required:
1 For both companies compute:
a. Current ratio
d. Net Assets
b. Accounts Receivable turnover (includes notes)
e. Debt ratio
c. Inventory turnover
f. Times Interest Earned
Identify the company you consider to be the better credit risk (evaluate liquidity and solvency) and explain why.
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