Summary information from the financial statements of two companies competing in the same industry follows. Required: For
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Summary information from the financial statements of two companies competing in the same industry follows.
Required: For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts (icluding notes) receivable turnover, (d) inventory turnover, (e) days sales in inventory, and (f) days sales uncollected. (Use 365 days a year. Do not round intermediate calculations.)
Identify the company you consider to the better in managing short-term credit risk.
o Barco Company
o Kyan Company
Transcribed Image Text:
Data from the current year-end balance sheets Assets Cash Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Barco Kyan Company Company Total liabilities and equity $21,500 $ 36,000 33,400 9,100 84,440 5,500 310,000 $ $ Data from the current year's income statement Sales Cost of goods sold 52,400 Interest expense 7,600 136,500 Net income 7,550 311,400 463,940 $551,450 $61,340 $ 94,300 85,800 107,000 180,000 136,800 463,940 Income tax expense Basic earnings per share 246,000 Total assets 104,150 Common stock, $5 par value Barco Kyan Company Company Beginning-of-year balance sheet data Accounts receivable, net Current notes receivable (trade) Merchandise inventory $551,450 Retained earnings $810,000 $907,200 591,100 636,500 8,900 15,569 194,431 5.40 16,000 25,045 229,655 4.67 $ 30,800 0 63,600 111,400 398,000 412,500 180,000 246,000 $ 52,200 0 127,300 98,600 Company Choose Numerator: Barco Kyan Current Ratio 1 Choose Denominator: / 1 1 || = = = Current Ratio Current Ratio to 1 to 1 Company Barco Kyan + Barco Kyan + + Choose Numerator: 1 Acid-Test Ratio 1 + + Company Choose Numerator: ✓ Choose Denominator: 1 + Accounts Receivable Turnover 1 1 1 11 = = = Choose Denominator: Acid-Test Ratio = Acid-test ratio II || Accounts Receivable Turnover Accounts Receivable Turnover times times to 1 to 1 Company Choose Numerator: Barco Kyan Company Choose Numerator: Barco Kyan Inventory Turnover 1 Choose Denominator: / 1 1 I 1 1 1 Days' Sales in Inventory Choose Denominator: X X II X = II X Days || Inventory Turnover Inventory Turnover 11 = II = times times Days' Sales in Inventory Days' Sales in Inventory days days Company Choose Numerator: Barco Kyan Days' Sales Uncollected 1 Choose Denominator: X / 1 / X X X Days 11 = = 11 Days' Sales Uncollected Days' Sales Uncollected days days Data from the current year-end balance sheets Assets Cash Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Barco Kyan Company Company Total liabilities and equity $21,500 $ 36,000 33,400 9,100 84,440 5,500 310,000 $ $ Data from the current year's income statement Sales Cost of goods sold 52,400 Interest expense 7,600 136,500 Net income 7,550 311,400 463,940 $551,450 $61,340 $ 94,300 85,800 107,000 180,000 136,800 463,940 Income tax expense Basic earnings per share 246,000 Total assets 104,150 Common stock, $5 par value Barco Kyan Company Company Beginning-of-year balance sheet data Accounts receivable, net Current notes receivable (trade) Merchandise inventory $551,450 Retained earnings $810,000 $907,200 591,100 636,500 8,900 15,569 194,431 5.40 16,000 25,045 229,655 4.67 $ 30,800 0 63,600 111,400 398,000 412,500 180,000 246,000 $ 52,200 0 127,300 98,600 Company Choose Numerator: Barco Kyan Current Ratio 1 Choose Denominator: / 1 1 || = = = Current Ratio Current Ratio to 1 to 1 Company Barco Kyan + Barco Kyan + + Choose Numerator: 1 Acid-Test Ratio 1 + + Company Choose Numerator: ✓ Choose Denominator: 1 + Accounts Receivable Turnover 1 1 1 11 = = = Choose Denominator: Acid-Test Ratio = Acid-test ratio II || Accounts Receivable Turnover Accounts Receivable Turnover times times to 1 to 1 Company Choose Numerator: Barco Kyan Company Choose Numerator: Barco Kyan Inventory Turnover 1 Choose Denominator: / 1 1 I 1 1 1 Days' Sales in Inventory Choose Denominator: X X II X = II X Days || Inventory Turnover Inventory Turnover 11 = II = times times Days' Sales in Inventory Days' Sales in Inventory days days Company Choose Numerator: Barco Kyan Days' Sales Uncollected 1 Choose Denominator: X / 1 / X X X Days 11 = = 11 Days' Sales Uncollected Days' Sales Uncollected days days
Expert Answer:
Answer rating: 100% (QA)
Current ratio measures the extent with each a company can effectively pay its short time obligations whenever they fall due And is computed using the formula Current ratio total assets current liabili... View the full answer
Related Book For
Fundamental Accounting Principles
ISBN: 978-0077862275
22nd edition
Authors: John Wild, Ken Shaw, Barbara Chiappetta
Posted Date:
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