Problem 13-5A Comparative ratio analysis P3 Summary information from the financial statements of two companies competing in the same industry follows. Barco Company Kyan Company Data from the current year-end balance sheets Assets Cash $ 19,500 $ 34,000 Accounts receivable, net 46,500 64,600 Merchandise inventory 84,440 132,500 Prepaid expenses 5,000 6,950 Plant assets, net Total assets 290,000 304,400 $445,440 $542,450 Liabilities and Equity Current liabilities $ 61,340 $ 93,300 Long-term notes payable 80,800 101,000 Common stock, $5 par value 180,000 206,000 Retained earnings 123,300 142,150 Total liabilities and equity $445,440 $542,450 Data from the current year's income statement Sales $770,000 $880,200 Cost of goods sold 585,100 632,500 Interest expense 7,900 13,000 Income tax expense 14,800 24,300 Net income 162,200 210,400 Basic earnings per share 4.51 5.11 Cash dividends per share 3.81 3.93 Beginning-of-year balance sheet data Accounts receivable, net $ 29,800 $ 54,200 Merchandise inventory 55,600 107,400 Total assets 398,000 382,500 Common stock, $5 par value 180,000 206,000 Retained earnings 98,300 93,600 Page 532 Required 1. 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. Round to one decimal place. Identify the company you consider to be the better short- term credit risk and explain why. Check (1) Kyan: Accounts receivable turnover, 14.8; Inventory turnover, 5.3 2. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on equity. Assuming that each company's stock can be purchased at $75 per share, compute their (e) price-earnings ratios and (f) dividend yields. Round to one decimal place. Identify which company's stock you would recommend as the better investment and explain why. (2) Barco: Profit margin, 21.1%; PE, 16.6