Comprehensive Ratio Analysis of Two Companies

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COMPREHENSIVE RATIO ANALYSIS OF TWO COMPANIES
Ginger Adair is considering an investment in the common stock of a chain of retail department stores. She has narrowed her choice to two retail companies, Lewis Corporation and Ramsey Corporation, whose income statements and balance sheets are presented below: Income Statements (for the year ended Dec. 31,2012) Lewis Net Sales $25,120,000 Cost of Goods Sold 12,284,000 Gross Margin $12,836,000 Operating Expenses Selling Expenses $9,645,200 Administrative Expenses 1,972,000 Total Operating Expenses $11,617,200 Income from Operations $1,218,800 Interest Expense 388,000 Income Before Income Taxes $830,800 Income Taxes Expense 400,000 Net Income $430,800 Earnings per share $4.31

Ramsey $50,420,000 29,668,000 $20,752,000 $14,216,400 4,868,000 $19,084,400 $1,667,600 456,000 $1,211,600 600,000 $611,600 $10.19

Balance Sheets (as of Dec. 31, 2012) Lewis Assets Cash Marketable Securities (at cost) Accounts Receivable (net) Inventory Prepaid Expenses Property, Plant, and Equipment (net) Intangible Assets Total Assets $160,000 406,800 1,105,600 1,259,600 108,800 5,827,200 1,106,400 $9,974,400

Ramsey $384,800 169,200 1,970,800 2,506,800 228,000 13,104,000 289,600 $18,653,200

Liabilities and Stockholders' Equity Accounts Payable $688,000 Notes Payable (due in less than one year) 300,000 Income Taxes Payable 100,400 Bonds Payable 4,000,000 Common Stock, $20 par value 2,000,000 Additional paid-in capital 1,219,600 Retained Earnings 1,666,400 Total Liabilities and Stockholders' Equity $9,974,400

$1,145,200 800,000 146,800 4,000,000 1,200,000 7,137,200 4,224,000 $18,653,200

Additional data for the companies are as follows:
Lewis $543,000 $1,250,000 $100,000 100,000 $60 Ramsey $985,000 $2,100,000 $228,000 60,000 $76

Net cash flows from operating activities Net capital expenditures Dividends paid Number of common shares Current market price per share

Accounts Receivable (at Dec. 31, 2011) Inventory (at Dec. 31,...
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