. (*)Please break this question down for me, I\' m all the way confused and I wo
ID: 2501211 • Letter: #
Question
. (*)Please break this question down for me, I'm all the way confused and I would like to make sure I'm putting the correct information in the right area's. Not understanding this chapter.
The question below is one full question. HELP :(
Summary information from the financial statements of two companies competing in the same industry follows?
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 $770,000 $ 591,100 8,300 Assets Sales 36,000 Cost of goods sold $ 21,500 36,400 9,600 Cash 51,400 8,200 Accounts receivable, net Current notes recelvable (trade) Merchandise inventory Prepaid expenses Plant assets, net 14,000 24,990 217,710 4.82 3.95 Interest expense Income tax expense Basic earnings per share Cash dividends per share 14,800 3.90 3.81 84,440 138,500 Net income 155,800 7,000 306,400 5,600 290,000 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 75,030Explanation / Answer
1.1 a. Current Ratio
Barco’s Current Ratio= Current Assets/ Current Liabilities
Current Assets
Current Liabilities
Cash
$21500
Current Liabilities
$61340
Accounts Receivables
$36400
Current Notes Receivables
$9600
Merchandise Inventory
$84440
Prepaid Expenses
$5600
$157540
$61340
Current Ratio = $157540/$61340
= 2.6
Kyan’s Current Ratio= Current Assets/ Current Liabilities
Current Assets
Current Liabilities
Cash
$36000
Current Liabilities
$104300
Accounts Receivables
$51400
Current Notes Receivables
$8200
Merchandise Inventory
$138500
Prepaid Expenses
$7000
$241100
$104300
Current Ratio = $241100/$104300
= 2.3
1.1 b.
Acid Test Ratio
= Total Current Assets-Inventory-Prepaid Expenses/Current Liabilites
Barco’s acid test ratio = $21500+36400+$9600/$61340
= $67500/$61340 =1.1
Kyan’s Acid test Ratio = $36000+$51400+$8200/$104300
= $95600/$104300
= .92
1.1.c.
Accounts Receivable Turnover =Net Sales/(Beginning Accounts Receivable+ Ending Accounts Receivables/2 )
Barco = $770000/($28800+36400/2)
= $770000/$32600
= 23.62
Kyan = $905200/($58200+51400/2)
= $905200/$54800
= 16.52
Days Sales un collected = Accounts receivables/net sales *365
Barco = $36400/$770000*365
= 17.25 days
Kyan = $51400/$905200*365
= 20.73 days
1.2. As the current ratio and Acid test ratio of Company Barco is highest that company will be better in managing short term credit risk.
Current Assets
Current Liabilities
Cash
$21500
Current Liabilities
$61340
Accounts Receivables
$36400
Current Notes Receivables
$9600
Merchandise Inventory
$84440
Prepaid Expenses
$5600
$157540
$61340
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