Problem 17-5A (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 Company	Kyan Company		Barco Company	Kyan Company
Data from the current year-end balance sheets			Data from the current years income statement
Assets			Sales	$ 780,000	$ 925,200
Cash	$ 20,500	$ 32,000	Cost of goods sold	590,100	634,500
Accounts receivable, net	38,400	58,400	Interest expense	8,300	15,000
Merchandise inventory	85,040	138,500	Income tax expense	14,992	25,542
Prepaid expenses	6,100	7,700	Net income	166,608	250,158
Plant assets, net	350,000	307,400	Basic earnings per share	4.38	6.38
Total assets	$ 500,040	$ 544,000	Cash dividends per share	3.74	3.92
Liabilities and Equity			Beginning-of-year balance sheet data
Current liabilities	$ 69,340	$ 98,300	Accounts receivable, net	$ 27,800	$ 56,200
Long-term notes payable	80,800	113,000	Merchandise inventory	55,600	105,400
Common stock, $5 par value	190,000	196,000	Total assets	448,000	392,500
Retained earnings	159,900	136,700	Common stock, $5 par value	190,000	196,000
Total liabilities and equity	$ 500,040	$ 544,000	Retained earnings	135,412	40,206

Problem 17-5A (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 equity. Assuming that each companys stock can be purchased at $70 per share, compute their (e) price-earnings ratios and (f) dividend yields.

2b. Identify which companys stock you would recommend as the better investment.