Barco Company Kyan Company Data from the current year’s income statement Sales $
ID: 2468018 • Letter: B
Question
Barco
Company
Kyan
Company
Data from the current year’s income statement
Sales
$
780,000
$
889,200
Cost of goods sold
589,100
638,500
Interest expense
8,300
16,000
Income tax expense
14,992
24,548
Net income
167,608
210,152
Basic earnings per share
3.81
4.86
Cash dividends per share
3.74
4.02
Beginning-of-year balance sheet data
Accounts receivable, net
$
27,800
$
53,200
Current notes receivable (trade)
0
0
Merchandise inventory
65,600
113,400
Total assets
418,000
392,500
Common stock, $5 par value
220,000
216,000
Retained earnings
137,152
93,462
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.)
For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on common stockholders’ equity. Assuming that share and each company’s stock can be purchased at $85 per share, compute their (e) price-earnings ratios and (f) dividend yields. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Barco
Company
Kyan
Company
Data from the current year’s income statement
Sales
$
780,000
$
889,200
Cost of goods sold
589,100
638,500
Interest expense
8,300
16,000
Income tax expense
14,992
24,548
Net income
167,608
210,152
Basic earnings per share
3.81
4.86
Cash dividends per share
3.74
4.02
Beginning-of-year balance sheet data
Accounts receivable, net
$
27,800
$
53,200
Current notes receivable (trade)
0
0
Merchandise inventory
65,600
113,400
Total assets
418,000
392,500
Common stock, $5 par value
220,000
216,000
Retained earnings
137,152
93,462
Explanation / Answer
Barco Company
Current assets= Accounts receivable + Merchandise inventory
Current assets=27800+65600=93400
Current liabilities will be calculated as follows:
In the given problem ,total assets are provided and on the liabilities side share capital & retained earnings are provided ,the difference between the two can be assumed as current liabilities as assets and liabilities always have equal balance.
Total assets-Total liabilities=Capital
Total liabilities=Total assets-capital
Total liabilities=418000-(220000+137152)
Total liabilities=60848
Assuming there are no long term liabilities , current liabilities =60848
Current ratio=93400/60848=1.53:1
Kyan Company
Current assets =53200+113400=166600
Current liabilities=392500-(216000+93462) =83038
Current ratio=166600/83038=2:1
Liquid assets =Current assets-Inventory-Prepaid expenses
Barco Company
Liquid assets=93400-65600=27800
Acid test ratio=27800/60848=0.45:1
Kyan Company
Liquid assets=53200
Acid test ratio=53200/83038=0.64:1
Barco Company
Assuming all sales are credit based.
Accounts receivable turnover ratio=780,000/27,800=28 times
Kyan Company
Assuming all sales are credit based.
Accounts receivable turnover ratio=889200/53200=17 times
Barco company
Inventory turnover ratio=589100/65600=8.98 times
Kyan company
Inventory turnover ratio=638500/113400=5.63 times
Barco company=65600/589100*365=40 days
Kyan company=113400/638500*365=64.8 days
Barco company
Day’s sale in inventory =27800/780000 * 365=13 days
Kyan Company
Day’s sale in inventory=53200/889200 * 365=21 days
1.Profit margin ratio=Profit/Sales * 100
Barco company=167608/780000*100=21.48%
Kyan company=210152/889200*100=23.63%
2.
Total asset turnover=Sales/Total assets
Barco company=780000/418000=1.866
Kyan company=889200/392500=2.26
3. Return on common shareholders=Net income/Outstanding number of shares
Outstanding number of shares=Share capital/Par value
Barco company
Outstanding shares=220000/5=44000 shares
Return on common equity shareholders=167608/44000=3.80
Kyan company
Outstanding shares=216000/5=43200 shares
Return on common equity shareholders=210152/43200=4.86
4.Price earning ratio=Market price per share/Earning per share
Barco company=85/3.81=22.30
Kyan company=85/4.86=17.48
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