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 Kyan Barco Kyan Company Company Company Company 905,200 648,500 Data from the current year-end balance sheets Data from the current year's income statement Assets Sales 770,000 $ 21,500 36,400 9,600 84,440 5,600 290,000 Cash 36,000 Cost of goods sold 591,100 Accounts receivable, net Current notes recelvable (trade) Merchandise inventory Prepaid expenses Plant assets, net 14,000 24,990 217,710 4.82 51,400 8,200 8,300 14,800 155,800 3.90 3.81 Interest expense Income tax expense Basic earnings per share Cash dividends per share 138,500 Net income 7,000 306,400 3.95 Total assets $447,540 $547,500 Beginning-of year balance sheet data Accounts receivable, net $ 28,800 58,200 0 Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value $ 61,340 $104,300 Current notes receivable (trade) 0 63,600 408,000 113,400 422,500 86,800 103,000 Merchandise inventory 226,000 Total assets 200,000 226,000 Retained earnings 99,400 114,200 Common stock, $5 par value 200,000 Total liabilities and equity $447,540 $547,500 Retained earnings 96,000 75,030

Explanation / Answer

Working Note

(a) Current Ratio Company Numerator / Denominator = Current Ratio Current Assets / Current Liabilities = Current Ratio Barco 157540 61340 = 2.568307793 to 1 Kyan 241100 104300 = 2.311601151 to 1 (b) Acid Test Ratio Company Numerator / Denominator = Acid Test Ratio Liquid Assets / Current Liabilities = Acid Test Ratio Barco 73100 61340 = 1.191718291 to 1 Kyan 102600 104300 = 0.983700863 to 1 (c) Accounts receivable turnover Company Numerator / Denominator = Accounts receivable turnover Net Credit Sales / Average Accounts receivable = Accounts receivable turnover Barco 770000 32600 = 23.6196319 times Kyan 905200 54800 = 16.51824818 times (d) Inventory turnover Company Numerator / Denominator = Inventory turnover Cost of Goods Sold / Average Inventory = Inventory turnover Barco 591100 88500 = 6.679096045 times Kyan 648500 111470 = 5.817708801 times (e) Days Sales in Inventory Company Numerator / Denominator = Days Sales in Inventory 365 / Inventory Turnover = Days Sales in Inventory Barco 365 6.679096045 = 54.64811369 Days Kyan 365 5.817708801 = 62.73947571 Days (f) Days Sales Uncollected Company Numerator / Denominator = Days Sales Uncollected 365 / Accounts Receivable Turnover = Days Sales Uncollected Barco 365 23.6196319 = 15.45324675 Days Kyan 365 16.51824818 = 22.09677419 Days

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