Summary information from the financial statements of two companies competing in

Question

Summary information from the financial statements of two companies competing in the same industry follows. Barco Company Company an Barco an Company Company Data from the current year-end balance sheets Data from the current year's income statement 924,200 Assets Sales $ 770,000 $ 634,500 $ 18,000 30,000 Cost of goods sold 586,100 9.300 14,800 159,800 3.80 Cash 18,000 25,514 246,186 53,400 Interest expense Accounts receivable, net Current notes recelvable (trade) Merchandise inventory Prepaid expenses Plant assets, net 39,400 Income tax expense Basic earnings per share Cash dividends per share 8,200 9,100 5,800 320,000 84,740 140,500 Net income 5.98 7,050 306,400 3.77 3.92 545,550 Total assets $477040 Beginning-of-year balance sheet data Accounts receivable, net Current notes receivable (trade) $ 31,800 51,200 0 Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value $ 62,340 $ 90,300 0 61,600 448,000 115,400 422,500 79,800 109,000 Merchandise inventory 206,000 210,000 Total assets 206,000 Retained earnings 124,900 140,250 Common stock, $5 par value 210,000 545,550 Retained earnings Total liabilities and equity $477040 123,440 55,568

Explanation / Answer

1 Current ratio = Current assets / current liabilities Current assets = Cash + accounts receivable + Current notes receivable + merchandise inventory + prepaid expense Barco Kyan Current assets 157040 239150 Current liabilities 62340 90300 Current ratio 2.5 2.6 2 Acid test ratio = Acid test assets / current liabilities Acid test assets = current assets - prepaid expense - merchandise inventory Barco Kyan Liquid assets 66500 91600 Current liabilities 62340 90300 Acid test ratio 1.1 1.0 3 Accounts receivable turnover = net credit sales / average accounts receivable Average accounts receivable = beginning receivable + ending receivable / 2 Receivable includes accounts receivable + current notes receivables Barco Kyan Net sales 770000 924200 Beginning receivable 31800 51200 Ending receivable 48500 61600 Average Receivable 40150 56400 Accounts receivable turnover 19.2 16.4 4 Inventory turnover = Net sales / average inventory             Average inventory = Beginning inventory + ending inventory / 2 Barco Kyan Cost of goods sold 586100 634500 Beginning inventory 61600 115400 Ending inventory 84740 140500 Average merchandise inventory 73170 127950 Inventory turnover 8.0 5.0 5 Days sale in inventory = 365 / inventory turnover Barco Kyan Total days 365 365 Inventory turnover 8.0 5.0 Days sales in inventory 46 74 Days 6 Day's sale uncollected = Accounts receivable *365/ net sales Barco Kyan Total days 365 365 Accounts receivable turnover 19.2 16.4 Day's sale uncollected 19 22 Days

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