Chapter 11
Financial Statement Analysis
581
AP-14B (
6
)
Below is select financial statement information for Beta Corp. and Gamma Inc. in 2016.
Beta Corp.
Gamma Inc.
Net Income
$157,840
$246,850
Shareholders' Equity
Preferred Shares
$8,740
$74,055
Common Shares
102,596
160,453
Retained Earnings
7,352
4,355
Total Shareholders' Equity
$118,688
$238,863
Number of Common Shares Outstanding
10,820
12,400
Both Beta and Gamma declared preferred dividends in 2016. For Beta, the total preferred
dividends were equal to 5% of net income; for Gamma, they were equal to 8% of net income.
Required
a) Calculate the following ratios for each company.
Beta Corp.
Gamma Inc.
Book Value per Share
Earnings per Share (EPS)
b) Based on the ratios from part a), which company would an investor be more likely to
invest in?
