Professional Documents
Culture Documents
Assignment Sol
Assignment Sol
GROUP : GC2
Following are data from the statements of two companies selling similar products:
Current Year-End Balance Sheet Data from the Current Year’s Income Statement
Sled Company Zip Company Sled Company Zip Company
Total equity and liabilities 354,200 452,800 avg. Stockholders’ equity 222600 288960
1. Calculate current ratios, acid-test ratios, inventory turnovers, and days’ sales uncollected for the two companies.
Then state which company you think is the better short-term credit risk and why.
comment : from the calculated ratio above zip company has slightly higher current ratio and acid -test ratio which
means that and both above 1 which means that zip company has a slightly better short -term credit risk compared to
sled company , but both of the companies can meet their short term credit obligations without even selling thier
inventory if they collected thier reciavables , but sled company has an advantage in selling its inventory with
inventory turnover ratio of 9.43 compared to zip company inventory turnover of 8.1 also sled company has a lower
days’ sales uncollected ratio of 22.81 compared to zip company ratio of 26.55 which present the advantage to sled
company to collect it's account resivable .
2. Calculate return on total assets employed and return on stockholders’ equity. Then, under the assumption that each company’s stock
can be purchased at book value, state which company’s stock you think is the better investment and why
return on total assets employed Net Income / average total assets 6.68% 6.45%
return on stockholders’ equity net income - p.d / average total equity 10.50% 10.00%
comment : sled company is the better investment because it has a higher return on assets and also a higher return on
equity compared to zip company