Problem 13-5A (Algo) Comparative ratio analysis LO P3

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Summary information from the financial statements of two companies competing in the same industry follows.

Barco

CompanyKyan

CompanyBarco

CompanyKyan

CompanyData from the current year-end balance sheetsData from the current year's income statementAssetsSales$790,000$913,200Cash$19,000$32,000Cost of goods sold590,100642,500Accounts receivable, net38,40055,400Interest expense8,90015,000Merchandise inventory84,440136,500Income tax expense15,18525,211Prepaid expenses5,2007,150Net income175,815230,489Plant assets, net290,000311,400Basic earnings per share5.494.68Total assets$437,040$542,450Cash dividends per share3.713.95Liabilities and EquityBeginning-of-year balance sheet dataCurrent liabilities$65,340$98,300Accounts receivable, net$26,800$53,200Long-term notes payable86,800115,000Merchandise inventory65,600109,400Common stock, $5 par value160,000246,000Total assets408,000372,500Retained earnings124,90083,150Common stock, $5 par value160,000246,000Total liabilities and equity$437,040$542,450Retained earnings67,80547,001

Problem 13-5A (Algo) Part 1

Required:

1a.For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) days' sales in inventory, and (f) days' sales uncollected.(Do not round intermediate calculations.)

1b.Identify the company you consider to be the better short-term credit risk.

Complet this question by entering your answers in the tabs below.

• 1A Current Ratio
• 1A Acid Test Ratio
• 1A Acct Rec Turn
• 1A Invent Turnover
• 1A Days Sal in Inv
• 1A Days Sal Uncol
• 1B shor

Problem 13-5A (Algo) Comparative ratio analysis LO P3

Skip to question

[The following information applies to the questions displayed below.]

Summary information from the financial statements of two companies competing in the same industry follows.

Barco

CompanyKyan

CompanyBarco

CompanyKyan

CompanyData from the current year-end balance sheetsData from the current year's income statementAssetsSales$790,000$913,200Cash$19,000$32,000Cost of goods sold590,100642,500Accounts receivable, net38,40055,400Interest expense8,90015,000Merchandise inventory84,440136,500Income tax expense15,18525,211Prepaid expenses5,2007,150Net income175,815230,489Plant assets, net290,000311,400Basic earnings per share5.494.68Total assets$437,040$542,450Cash dividends per share3.713.95Liabilities and EquityBeginning-of-year balance sheet dataCurrent liabilities$65,340$98,300Accounts receivable, net$26,800$53,200Long-term notes payable86,800115,000Merchandise inventory65,600109,400Common stock, $5 par value160,000246,000Total assets408,000372,500Retained earnings124,90083,150Common stock, $5 par value160,000246,000Total liabilities and equity$437,040$542,450Retained earnings67,80547,001

Problem 13-5A (Algo) Part 2

2a.For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on common stockholders' equity. Assuming that each company's stock can be purchased at $85 per share, compute their (e) price-earnings ratios and (f) dividend yields.(Do not round intermediate calculations. Round your answers to 2 decimal places.)

2b.Identify which company's stock you would recommend as the better investment.

Complet this question by entering your answers in the tabs below.

• 2A Prof Mar Ratio
• 2A Tot Asset Turn
• 2A Ret on Tot Assets
• 2A Ret On Com Stock
• 2A Price Earn Ratio
• 2A Div Yield
• Req 2B

For both companies compute the profit margin ratio.

(a)Profit Margin RatioCompanyChoose Numerator:/Choose Denominator:=Profit margin ratio/=Profit margin ratioBarco/=%Kyan/=%

• 2A Tot Asset Turn
• 2A Ret on Tot Assets
• 2A Ret On Com Stock
• 2A Price Earn Ratio
• 2A Div Yield
• Req 2B

For both companies compute the total asset turnover

(b)Total Asset Turnover

CompanyChoose Numerator:/Choose Denominator:=Total Asset Turnover/=Total asset turnover

Barco/=times

Kyan /=times