Summary information from the financial statemets of two companies competing in t

Question

Summary information from the financial statemets of two companies competing in the same industry Problem me industry Problem 17-58 Comparatiwe ratio anahsis A P3 Fargo Company Compamy Ball Fargo Compary Company Data from the current yean end balance sheets Assets Cash Accounts recervable, net Current notes recevable (trade) Merchandise inventory Prepaid expenses Plant assets, net Total assets Data from the current year's income seatement Sales $393,600 $667 500 20,600 480,000 12.300 2.300 20,000 36500 Cost of poods sold 5.900 5,700 77,100 86800 2,000 Net income 176.900 252.300 0,500 Interest experse 9.000 Income 12x expense 1600 33.850 61.700 2.19 1.27 ,700 10,100 Basic eonings per share 8109 1463.00 Beginning-ofyear balance sheet $ 72.200 73.300 Accouets receiable, ret Current noces recevable lrade) Liabilities and Equity Current labilities Long-term notes payable Common stack, $5 par value Retained earnings Total liabilities and equity $ 90500 $ 97,000 93.000 3,300 Mertha 133,000 41,000 Tcal ssers ndise iwortary 05,100 80,500 443,000 141,000 49100 109,700 383.400 129,1c0 Common tock $5 par value 5382, 10 $460.400 Retained earning

Explanation / Answer

1 Working capital = Current asset - current liabilities Fargo company Ball company Current assets 205200 208100 Current liabilities 90500 97000 Working capital 114700 111100 2 Current ratio = Current assets / current Liabilities Current assets 205200 208100 Current liabilities 90500 97000 Current ratio 2.3 2.1 3 Quick ratio = (current assets - inventory -prepaid expense )/ current liabilities Quick assets 108700 116000 Current liabilities 90500 97000 Acid test ratio 1.2 1.2 4 Receivable turnover = Net sales / Average accounts receivable Net sales   393600 667500 Beginning accounts receivable 72200 73300 Ending accounts receivable 77100 70500 Average accounts receivable 74650 71900 Average accounts receivable = (Beginning + ending )/2 Receivable turnover 5.3 9.3 5 Days sales uncollected = 365 / accounts receivable tunover Days sales uncollected 69.2 39.3 Days 6 Inventory turnover = Cost of goods sold / Average inventory Cost of goods sold 290600 480000 Beginning inventory 105100 80500 Ending inventory 86800 82000 Average inventory 95950 81250 Average inventory = (Beginning + Ending )/2 Inventory turnover 3.0 5.9 7 Days sale in inventory = 365 / inventory turnover Days sales in inventory 120.5 61.8 Days

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