PART $2(22$ pts$)$: Summary information from the financial statements of two companies competing in the same industry is provided in Appendix $2.$ Please answer the below questions $1-3$ by using these statements.

Question $1(10$ pts$)$: For both companies, compute the current ratio, receivables turnover ratio, inventory turnover ratio, days' sales in inventory, and days' sales uncollected. $($Only answers should be given. No partial credit!$)$

Question $2(4$ pts$)$: Assuming that you are a loan officer in a reputable bank, and you are considering extending a credit line to only one company, either Barco or Kyan. Your responsibility is to recommend to your supervisor which company the bank will extend shortterm credit for $20$ days. Which company would you recommend? $($Explain your rationale, please. Only the answer of Barco$/$Kyan will not be accepted$)$

Answer:

Question $3(8$ pts$)$: $1$ year later, the debt$-$to$-$equity ratios for Barco and Kyan Companies are calculated as the following.

a$.$ Do the companies have more or less debt in the year $20$XX versus one year ago $($the year $20$XY$)?($Explain your rationale, please. Only the answer of less$/$more will not be accepted$)$ Answer:

b$.$ Calculate the debt ratio for the two companies for the years $20$XX and $20$XY$.($Only answers should be given. No partial credit!$)$

c$.$ If you were a creditor, to which company you want to extend credit? Answer based on your debt ratio calculations and consider which company has more bankruptcy risk. $($Explain your rationale, please. Only the answer of Barco$/$Kyan will not be accepted$)$ Appendix $2$: Summary information from the financial statements of Barco and Kyan companies.

$\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|$c$|$c$|$c$|\}$

$\backslash$hline & $\backslash [$

$\backslash$begin$\{$array$\}\{$l$\}$

$\backslash$text $\{$ Barco $\}\backslash \backslash$

$\backslash$text $\{$ Combany $\}$

$\backslash$end$\{$array$\}$

$\backslash ]$ & $\backslash$begin$\{$tabular$\}\{$l$\}$

Kyan $\backslash \backslash$

Company

$\backslash$end$\{$tabular$\}$ & & $\backslash [$

$\backslash$begin$\{$array$\}\{$l$\}$

$\backslash$text $\{$ Barco $\}\backslash \backslash$

$\backslash$text $\{$ Componiny $\}$

$\backslash$end$\{$array$\}$

$\backslash ]$ & $\backslash$begin$\{$tabular$\}\{$l$\}$

Kyan $\backslash \backslash$

Company

$\backslash$end$\{$tabular$\}\backslash \backslash$

$\backslash$hline Data tom the current year end balance sheets & & & Data from the current year's income statement & & $\backslash \backslash$

$\backslash$hline Assets & & & Soles & $\backslash$$$790,000$ & $\backslash$$$928,200\backslash \backslash$

$\backslash$hline Cash & $\backslash$$$22,000$ & $\backslash$$$32,000$ & Cost of goods sold & $590,100$ & $648,500\backslash \backslash$

$\backslash$hline Accounts recelvable, net & $33,400$ & $59,400$ & Interest expense & $8,600$ & $18,000\backslash \backslash$

$\backslash$hline Merchandise inventory & $84,740$ & $142,500$ & Income tax expense & $15,185$ & $25,025\backslash \backslash$

$\backslash$hline Prepald expenses & $6,100$ & $7,550$ & Net Income & $176,115$ & $236,075\backslash \backslash$

$\backslash$hline Planta assets, net & $340,000$ & $304,400$ & Basic earmings per share & $5\mathrm{.}50$ & $5\mathrm{.}73\backslash \backslash$

$\backslash$hline Totola assets & $\backslash$$$486,240$ & $\backslash$$$545,850$ & Cash dividends per shave & $3\mathrm{.}77$ & $4\mathrm{.}03\backslash \backslash$

$\backslash$hline Liabilities and Equity & & & Beginning$-$ofyear balance sheet data & & $\backslash \backslash$

$\backslash$hline Current$|$l$|$abilites & $\backslash$$$68,340$ & $\backslash$$$102,300$ & Accounts recelvable, net & $\backslash$$$29,800$ & $\backslash$$$56,200\backslash \backslash$

$\backslash$hline Long$-$term notes payable & $82,800$ & $107,000$ & Merchandise Inventory & $61,600$ & $105,400\backslash \backslash$

$\backslash$hline Common stock, $\backslash$$$5$ par value & $160,000$ & $206,000$ & Total assets & $398,000$ & $382,500\backslash \backslash$

$\backslash$hline Retaned earnings & $175,100$ & $130,550$ & Common stock, $\backslash (\backslash$$ $5\backslash )$ par value & $160,000$ & $206,000\backslash \backslash$

$\backslash$hline Total $|$labilities and equity & $\backslash$$$486,240$ & $\backslash$$$545,850$ & Retalned earnings & $119,925$ & $60,511\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$