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 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 $ 19,000 37,400 84,740 5,300 320,000 $ 466,440 $ 36,000 53,400 132,500 7,050 306,400 $ 535, 350 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 $ 810,000 585,100 7,600 15,569 201,731 4.80 3.77 $ 881,200 644,500 18,000 24,327 194,373 4.50 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 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 (6 days' sales uncollected. (Do not round intermediate calculations.) 1b. Identify the company you consider to be the better short-term credit risk. 1A Current Ratio 1A Acid Test Ratio 1A Acct Rec Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv Uncol 1B short term For both companies compute the acid-test ratio. Acid-Test Ratio (b) Company Numerator: Denominator: + = Acid-Test Ratio Acid-test ratio 0 to 1 Barco + Kyan + 1 0 to 1 1A Current Ratio 1A Acid Test Ratio 1A Acct Rec Turn 1A Invent Turnover 1A Days Sal in Inv 1A Days Sal Uncol 10 short term For both companies compute the accounts (including notes) receivable turnover. (c) Company Accounts Receivable Turnover Denominator: Numerator: 1 1 Accounts Receivable Turnover Accounts receivable turnover 11 Barco = 0 times Kyan 11 0 times 1A Current Ratio 1A Acid Test 1A Acct Rec Ratio Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Iny Uncol 1B short term For both companies compute the inventory turnover. (d) Company Inventory Turnover Denominator: Numerator: 1 1 Inventory Turnover Inventory turnover 0 times / 11 Barco Kyan 1 11 0 times 1A Current Ratio 1A Acid Test Ratio 1A Acct Rec Turn 1A Invent 1A Days Sal in 1A Days Sal Turnover Inv Uncol 10 short term For both companies compute the days' sales in inventory. (e) Company Days' Sales in Inventory. Denominator: Numerator: X Days 1 1 X = Days' Sales in Inventory Days' sales in inventory 0 days 0 days 7 x Barco Kyan 1 X = 1A Current Ratio 1A Acid Test Ratio 1A Acct Rec Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv Uncol 1B short term For both companies compute the days' sales uncollected. (f) Company Days' Sales Uncollected Denominator: Numerator: X Days II x x Days' Sales Uncollected Days' sales uncollected 0 days 0 days 11 Barco Kyan 1 X 11 1A Current Ratio 1A Acid Test Ratio 1A Acct Rec Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv Uncol 1B short term Identify the company you consider to be the better short-term credit risk. Better short-term credit risk