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 Kyan Company Barco Company Kyan Company Data from the current year-end balance sheets Data from the current year’s income statement Assets Sales $ 780,000 $ 889,200 Cash $ 21,500 $ 33,000 Cost of goods sold 589,100 638,500 Accounts receivable, net 36,400 50,400 Interest expense 8,300 16,000 Current notes receivable (trade) 9,100 8,800 Income tax expense 14,992 24,548 Merchandise inventory 84,640 138,500 Net income 167,608 210,152 Prepaid expenses 5,700 7,150 Basic earnings per share 3.81 4.86 Plant assets, net 350,000 307,400 Cash dividends per share 3.74 4.02 Total assets $ 507,340 $ 545,250 Beginning-of-year balance sheet data Liabilities and Equity Accounts receivable, net $ 27,800 $ 53,200 Current liabilities $ 67,340 $ 94,300 Current notes receivable (trade) 0 0 Long-term notes payable 79,800 105,000 Merchandise inventory 65,600 113,400 Common stock, $5 par value 220,000 216,000 Total assets 418,000 392,500 Retained earnings 140,200 129,950 Common stock, $5 par value 220,000 216,000 Total liabilities and equity $ 507,340 $ 545,250 Retained earnings 137,152 93,462

Problem 17-5 Part 1

For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts (including notes) receivable turnover, (d) inventory turnover, (e) days’ sales in inventory, and (f) days’ sales uncollected.(Do not round intermediate calculations.)

Required: 1.1

For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts (including notes) receivable turnover, (d) inventory turnover, (e) days’ sales in inventory, and (f) days’ sales uncollected.(Do not round intermediate calculations.)

1.2 Identify the company you consider to be better in managing short-term credit risk. Barco company Kyan company

Explanation / Answer

(a) Barco Company Kyan Company Current Ratio Current assets/Current Liabilities Current assets/Current Liabilities = 157340/67340 237850/94300 = 2 3 (b) Acid test Ratio (Cash+Accounts Receivable+Short term investment)/current Liabilities = (21500+36400)/67340 (33000+50400)/94300 1 1 C) Accounts Receivable turnover ratio = Sales/Accounts Receivable = 780000/45500 889200/59200 = 17 15 d) Inventory turnover ratio = Cost of goods sold/Inventory = 589100/84640 638500/138500 = 7 5 (e) Day's sales in inventory = (Inventory/Cost of goods sold)*365 = (84640/589100)*365 (138500/638500)*365 = 52 79 (f) Day's sales uncollected = (Accounts Receivable/Net Credit Sales)*365 = (45500/780000)*365 (59200/889200)*365 = 21 24

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.