The next step for Dr. Washington is to help him compare stocks and make good investment...

The next step for Dr. Washington 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. Washington which one would make a better investment.

Prepare the following calculation for each company.

• 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

- Show calculation in excel sheet

- Compare the company calculations to the industry avg.

- 1 page document explaining which company is a better investment

- Explain the significance of each calculation.

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