Compare stocks and make good investment decisions

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The next step for Dr. Bueller is to help him compare stocks and make good investment decisions. With that in mind, you want to compare Industrial Company #1 with its top rival Industrial Company #2 and explain to Dr. Bueller which one would make a better investment.

In preparation for sharing your thoughts with Dr. Bueller, go to the Small Group Discussion Board and divide the following calculations evenly among group members. Each group member will be responsible for submitting his or her assigned calculations.

  • Operating income margin
  • Net income margin
  • Current ratio
  • Earnings per share
  • Price-to-earnings (P/E) ratio.

Industrial Company #1

(in millions)

2008

2009

2010

Sales

$4,250

$4,500

$4,750

Operating Income

$400

$445

$480

Net Income

$200

$225

$250

Current Assets

$2,500

$2,750

$2,850

Current Liabilities

$2,300

$2,450

$2,500

Shares Outstanding

100

100

100

Average Stock Price

$32

$39

$50

Industrial Company #2

(in millions)

2008

2009

2010

Sales

$3,350

$3,750

$4,250

Operating Income

$335

$395

$470

Net Income

$168

$198

$240

Current Assets

$1,750

$1,900

$2,100

Current Liabilities

$1,350

$1,400

$1,500

Shares Outstanding

80

80

80

Av Stock Price

$38

$46

$62

2010 Industry Avg.

Operating Margin

10.50%

Net Margin

5.50%

Current Ratio

1.25

Earnings/Share

$2.75

PE Ratio

20.0

Group Project Guidelines

  • perform the calculations of the following values for both Industrial Company #1 and Industrial Company #2 using the information from the data tables located in the Assignment Description:
    • Operating income margin
    • Net income margin
    • Current ratio
    • Earnings per share
    • Price-to-earnings (P/E) ratios
  • organize calculations in an Excel spreadsheet
    • Compare his or her calculations for both Industrial Company #1 and Industrial Company #2.
    • Compare the company calculation values to the industry averages.
    • In your own words, explain the significance of each calculation.
  • write 3 pages (body of paper), in a Word document, about which company is a better investment


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