17-5A (Algo) Comparative ratio analysis LO P3 [The following information applies to the questions displayed below.] 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 $ 800,000 $ 888,200 Cash $ 22,000 $ 36,000 Cost of goods sold 595,100 640,500 Accounts receivable, net 35,400 54,400 Merchandise inventory 84,840 140,500 Prepaid expenses Plant assets, net 6,100 290,000 7,100 Net income 313,400 Total assets $ 438,340 $ 551,400 Current liabilities Liabilities and Equity Long-term notes payable Common stock, $5 par value Retained earnings $ 66,340 $ 102,300 78,800 200,000 93,200 109,000 206,000 134,100 Total liabilities and equity $ 438,340 $ 551,400 Interest expense Income tax expense Basic earnings per share Cash dividends per share Beginning-of-year balance sheet data. Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings 8,600 15,000 15,377 24,521 180,923 208,179 4.52 3.74 5.05 3.94 $ 28,800 $ 51,200 55,600 115,400 418,000 402,500 200,000 206,000 61,877 88,249 Required: 1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) days' sales in inventory, and (f) days' sales uncollected. (Do not round intermediate calculations.) 1b. Identify the company you consider to be the better short-term credit risk. Complete this question by entering your answers in the tabs below. Ratio 1A Current 1A Acid Test 1A Acct Rec Ratio Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv Uncol 1B short term For both companies compute the current ratio. (a) Company Barco Kyan Numerator: Current Ratio Denominator: = Current Ratio = Current ratio = 0 to 1 = 0 to 1 < 1A Current Ratio 1A Acid Test Ratio 1A Current Ratio 1A Acid Test 1A Acct Rec Ratio Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv Uncol 1B short term For both companies compute the acid-test ratio. (b) Company Barco + Kyan + Acid-Test Ratio Numerator: Denominator: = Acid-Test Ratio Acid-test ratio + < 1A Current Ratio 1A Acct Rec Turn > 0 to 1 0 to 1 1A Current Ratio 1A Acid Test 1A Acct Rec Ratio Turn 1A Invent 1A Days Sal in Turnover Inv 1A Days Sal Uncol 1B short term For both companies compute the accounts (including notes) receivable turnover. (c) Company Numerator: Barco Kyan Accounts Receivable Turnover Denominator: = Accounts Receivable Turnover = Accounts receivable turnover 0 times 0 times < 1A Acid Test Ratio 1A Invent Turnover > 1A Current Ratio 1A Acid Test 1A Acct Rec Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv 1B short term Uncol Ratio For both companies compute the inventory turnover. (d) Company Numerator: Barco Kyan Inventory Turnover Denominator: = Inventory Turnover < 1A Acct Rec Turn Inventory turnover = 0 times = 0 times 1A Days Sal in Inv > 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv Uncol 1B short term 1A Current 1A Acid Test 1A Acct Rec Ratio Ratio Turn For both companies compute the days' sales in inventory. (e) Company Barco Kyan Numerator: Days' Sales in Inventory Denominator: Days Days' Sales in Inventory Days' sales in inventory 0 days 0 days < 1A Invent Turnover 1A Days Sal Uncol > 1A Current Ratio 1A Acid Test Ratio 1A Acct Rec Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv Uncol 1B short term For both companies compute the days' sales uncollected. (f) Company Numerator: 1 Days' Sales Uncollected Denominator: Barco Kyan < 1A Days Sal in Inv x Days = Days' Sales Uncollected = Days' sales uncollected = 0 days = 1B short term > 0 days 1A Current Ratio 1A Acid Test Ratio 1A Acct Rec Turn 1A Invent 1A Days Sal in 1A Days Sal Turnover Inv Uncol 1B short term Identify the company you consider to be the better short-term credit risk. Better short-term credit risk < 1A Days Sal Uncol 1B short term >