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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	$ 770,000	$ 917,200
Cash	$ 21,000	$ 32,000	Cost of goods sold	593,100	632,500
Accounts receivable, net	35,400	50,400	Interest expense	7,700	11,000
Merchandise inventory	84,540	136,500	Income tax expense	14,800	25,321
Prepaid expenses	5,100	7,150	Net income	154,400	248,379
Plant assets, net	370,000	306,400	Basic earnings per share	4.83	5.26
Total assets	$ 516,040	$ 532,450	Cash dividends per share	3.79	3.97
Liabilities and Equity			Beginning-of-year balance sheet data
Current liabilities	$ 61,340	$ 95,300	Accounts receivable, net	$ 26,800	$ 54,200
Long-term notes payable	84,800	109,000	Merchandise inventory	53,600	113,400
Common stock, $5 par value	160,000	236,000	Total assets	378,000	372,500
Retained earnings	209,900	92,150	Common stock, $5 par value	160,000	236,000
Total liabilities and equity	$ 516,040	$ 532,450	Retained earnings	176,780	31,155

Problem 17-5A (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.

Note: Do not round intermediate calculations.

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