Evaluating Employment Opportunities
Assume that you will soon graduate from college and that you have job offers with two pharmaceutical firms. The first offer is with Alpha Research, a relatively new and aggressive company. The second is with Omega Scientific, a very well established and conservative company.
Financial information pertaining to each firm, and to the pharmaceutical industry as a whole, is as follows:
Financial Measure | Alpha | Omega | Industry Average |
Current ratio | 2.2 to 1 | 4.5 to 1 | 2.5 to 1 |
Quick ratio | 1.2 to 1 | 2.8 to 1 | 1.5 to 1 |
Return on assets | 17% | 8% | 10% |
Return on equity | 28% | 14% | 16% |
P/e ratio | 20 to 1 | 10 to 1 | 12 to 1 |
The Omega offer is for $46,000 per year. The Alpha offer is for $42,000. However, unlike Omega, Alpha awards its employees a stock option bonus based on profitability for the year. Each option enables the employee to purchase shares of Alpha’s common stock at a significantly reduced price. The more profitable Alpha is, the more stock each employee can buy at a discount.
Show how the above information may help you justify accepting the Alpha Research offer, even though the starting salary is $4,000 lower than the Omega Scientific offer.
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