John Snow has recently retired, and he received a large lump sum settlement from his employer. He would like to invest this money to achieve a stable long term income. He is considering investing in the following two companies: Allied Grocers (AG) are a 3-year-old online grocery retailer that specializes in delivering a wide selection of quality food products through an online platform. Beta Solutions (BS) is an established 10-year-old electronics company that is known for selling the most innovative electronic products and software solutions. Selected financial data for 2019 AG BS Average total assets 1,500,000 4,000,000 Average # of common shares outstanding (no preferred shares) 10,000 10,000 Dividends paid 10,000 50,000 Current Market price per share $95 $165 Net sales 1,300,000 6,300,000 Cost of goods sold 900,000 4,200,000 Gross profit 400,000 2,100,000 Operating Expenses: Administrative expenses 80,000 1,000,000 Marketing expenses 120,000 300,000 Research and Development 5,000 200,000 Total Operating expenses 205,000 1,500,000 Net income 195,000 600,000 Required: Calculate at least 5 ratios for each company to help John to make his decision. Analyze the ratios and provide advice to John.
John Snow has recently retired, and he received a large lump sum settlement from his employer. He would like to invest this money to achieve a stable long term income. He is considering investing in the following two companies:
Allied Grocers (AG) are a 3-year-old online grocery retailer that specializes in delivering a wide selection of quality food products through an online platform.
Beta Solutions (BS) is an established 10-year-old electronics company that is known for selling the most innovative electronic products and software solutions.
Selected financial data for 2019
|
|
AG |
BS |
|
Average total assets |
1,500,000 |
4,000,000 |
|
Average # of common shares outstanding (no |
10,000 |
10,000 |
|
Dividends paid |
10,000 |
50,000 |
|
Current Market price per share |
$95 |
$165 |
|
Net sales |
1,300,000 |
6,300,000 |
|
Cost of goods sold |
900,000 |
4,200,000 |
|
Gross profit |
400,000 |
2,100,000 |
|
Operating Expenses: |
|
|
|
Administrative expenses |
80,000 |
1,000,000 |
|
Marketing expenses |
120,000 |
300,000 |
|
Research and Development |
5,000 |
200,000 |
|
Total Operating expenses |
205,000 |
1,500,000 |
|
Net income |
195,000 |
600,000 |
Required:
- Calculate at least 5 ratios for each company to help John to make his decision.
- Analyze the ratios and provide advice to John.
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