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ID: 2437378 • Letter: #
Question
[The following information applies to the questions displayed below.]
Summary information from the financial statements of two companies competing in the same industry follows.
Company Kyan
Company Barco
Company Kyan
Company Data from the current year-end balance sheets Data from the current year’s income statement Assets Sales $ 790,000 $ 903,200 Cash $ 21,500 $ 37,000 Cost of goods sold 590,100 634,500 Accounts receivable, net 35,400 58,400 Interest expense 9,200 19,000 Current notes receivable (trade) 9,600 8,800 Income tax expense 15,185 24,935 Merchandise inventory 84,840 132,500 Net income 175,515 224,765 Prepaid expenses 5,400 7,750 Basic earnings per share 4.62 4.97 Plant assets, net 280,000 307,400 Cash dividends per share 3.70 4.00 Total assets $ 436,740 $ 551,850 Beginning-of-year balance sheet data Liabilities and Equity Accounts receivable, net $ 30,800 $ 55,200 Current liabilities $ 64,340 $ 91,300 Current notes receivable (trade) 0 0 Long-term notes payable 80,800 107,000 Merchandise inventory 61,600 115,400 Common stock, $5 par value 190,000 226,000 Total assets 388,000 372,500 Retained earnings 101,600 127,550 Common stock, $5 par value 190,000 226,000 Total liabilities and equity $ 436,740 $ 551,850 Retained earnings 66,685 83,585
Explanation / Answer
Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. 1a Barco Kyan a. Current Ratio Current Assets/Current Liabilities 156740/64340 244450/91300 2.44 2.68 Current Assets: Cash 21500 37000 Accounts Receivable 35400 58400 Current Notes 9600 8800 Merchandise Inventory 84840 132500 Prepaid Expense 5400 7750 Total Current Assets 156740 244450 Current Liabilities 64340 91300 b. Acid Test Ratio (Current Assets-Inventory)/Current Liabilities 66500/64340 104200/91300 1.03 1.14 Assets for Acid Test: Cash 21500 37000 Accounts Receivable 35400 58400 Current Notes 9600 8800 Total Current Assets 66500 104200 Current Liabilities 64340 91300 c. Accounts Receivable turnover Net Credit Sales/AVERAGE accounts Receivable including Note 790000/37900 903200/61200 20.84 14.76 Average Accounts and Notes ((35400+9600)+30800)/2 ((58400+8800)+55200)/2 37900 61200 d. Inventory Turnover COGS/Average Inventory 590100/73220 634500/123950 8.06 5.12 Average Inventory (84840+61600)/2 (132500+115400)/2 73220 123950 e. Days sale in Inventory 365/Inventory Turnover 365/8.06 365/5.12 45 71 f.Days sales uncollected 365/Accounts Receivable Turnover 365/20.84 365/14.76 18 25 1b Kyan is better for short term credit risk considering higher Current/Acid and turnover ratio 2a Profit Margin Ratio Net Income/Sales 175515/790000 224765/903200 22.2% 24.9% Total Asset Turnover Net Sales/Average total assets 790000/412370 903200/462175 1.92 1.95 Average total Asset (436740+388000)/2 (551850+372500)/2 412370 462175 Return on total Asset EBIT/Total Average Assets (790000-590100)/412370 (903200-634500)/462175 48% 58% Return on Stockholder Equity Net Income/Average Shareholder Equity 175515/274143 224765/331567 64% 68% Average Shareholder Equity ((190000+101600)+(190000+66685))/2 ((226000+127550)+(226000+83583))/2 274143 331567 Price Earning Ratio Share Price/EPS 80/4.62 80/4.97 17.32 16.10 Dividend Yield Cash Dividend/Share Price 3.7/80 4/80 4.6% 5.0% 2b. Barco looks better for investment considering Low PE and Higher Dividend Yield
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