Prepare a comparative written evaluation of the ratio

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Reference no: EM13865876

The financial statements for Armstrong and Blair companies are summarized here:

The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years and each has had steady growth. Despite these similarities, the management of each has a different viewpoint in many respects. Blair is more conservative, and as its president said, we avoid what we consider to be undue risk. Both companies use straight- line depreciation, but Blair estimates slightly shorter useful lives than Armstrong. No shares were issued in the current year and neither company is publicly held. Blair Company has an annual audit by a CPA, but Armstrong Company does not. Assume the end- of- year total assets and net equipment balances approximate the year’s average and all sales are on account.

Required:

1. Calculate the ratios in Exhibit 13.5 for which sufficient information is available. Round all calculations to two decimal places.

2. A venture capitalist is considering buying shares in one of the two companies. Based on the data given, prepare a comparative written evaluation of the ratio analyses (and any other avail-able information) and conclude with your recommended choice.

Reference no: EM13865876

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