Required information Problem 17-5A (Algo) Comparative ratio analysis LO P3 (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 Company Kyan Company Barco Company Kyan Company $ 19,000 37,400 84,740 5,300 320,000 $ 466,440 Data from the current year-end balance sheets Assets Cash Accounts receivable, net 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 Total liabilities and equity $ 810,000 585,100 7,600 15,569 201,731 4.80 $ 36,000 53,400 132,500 7,050 306,400 $ 535, 350 $ 881,200 644,500 18,000 24,327 194,373 4.50 Data from the current year's income statement Sales Cost of goods sold Interest expense Income tax expense Net income Basic earnings per share Cash dividends per share Beginning-of-year balance sheet data Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings 3.77 3.97 $ 64,340 79,800 210,000 112,300 $ 466,440 $ 99,300 117,000 216,000 103,050 $ 535,350 $ 27,800 59,600 398,000 210,000 68,909 $ 56,200 115,400 412,500 216,000 80,181 Problem 17-5A (Algo) Part 2 a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, () return on total assets, and (d) return on equity. ssuming that each company's stock can be purchased at $100 per share, compute their (e) price-earnings ratios and ( dividend elds. b. Identify which company's stock you would recommend as the better investment. 2A Prof Mar Ratio 2A Tot Asset Turn 2A Ret on Tot Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Reg 2B For both companies compute the profit margin ratio. (a) Company Profit Margin Ratio Denominator: Numerator: ! ! II Profit margin ratio Profit margin ratio 0 % 0 % 1 Barco Kyan / 11 2A Prof Mar Ratio 2A Tot Asset 2A Ret on Tot Turn Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Req 2B For both companies compute the total asset turnover (b) Total Asset Turnover Denominator: Company Numerator: = = Total Asset Turnover Total asset turnover 0 times Barco Kyan 11 0 times 2A Prof Mar Ratio 2A Tot Asset 2A Ret on Tot Turn Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Req 2B For both companies compute the return on total assets. (c) Company Return on Total Assets Denominator: Numerator: 1 II = 1 / Return on Total Assets Return on total assets 0 % 0 % = Barco Kyan 7 2A Prof Mar Ratio 2A Tot Asset Turn 2A Ret on Tot Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Req 2B For both companies compute the return on equity. (d) Company Return On Equity Denominator Numerator: Return On Equity Return On equity ! 11 11 0 % Barco Kyan 11 0 % 2A Prof Mar Ratio 2A Tot Asset 2A Ret on Tot Turn Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Reg 2B Assuming that share and each company's stock can be purchased at $100 per share, compute their price-earnings ratios. Price-Earnings Ratio Denominator: Company Numerator: 1 11 Price-Earnings Ratio Price-earnings ratio 0 times 0 times Barco Kyan = = 2A Prof Mar 2A Tot Asset 2A Ret on Tot Ratio Turn Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Reg 2B Assuming that each company's stock can be purchased at $100 per share, compute their dividend yields. (f) Company Dividend Yield Denominator: Numerator: 11 Dividend Yield Dividend yield 0 % 11 Barco Kyan 1 = 0 % Complete this question by entering your answers in the tabs below. 2A Prof Mar 2A Tot Asset 2A Ret on Tot Ratio Turn Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Reg 2B Identify which company's stock you would recommend as the better investment. The better investment