Ch 13 Q6

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 years income statement
Assets								Sales	$	780,000		$	892,200
Cash	$	21,500		$	35,000			Cost of goods sold		586,100			634,500
Accounts receivable, net		36,400			51,400			Interest expense		7,600			14,000
Merchandise inventory		84,940			136,500			Income tax expense		14,992			24,631
Prepaid expenses		6,100			7,100			Net income		171,308			219,069
Plant assets, net		300,000			312,400			Basic earnings per share		4.76			4.64
Total assets	$	448,940		$	542,400			Cash dividends per share		3.78			4.00
Liabilities and Equity								Beginning-of-year balance sheet data
Current liabilities	$	62,340		$	92,300			Accounts receivable, net	$	30,800		$	50,200
Long-term notes payable		86,800			117,000			Merchandise inventory		61,600			113,400
Common stock, $5 par value		180,000			236,000			Total assets		428,000			372,500
Retained earnings		119,800			97,100			Common stock, $5 par value		180,000			236,000
Total liabilities and equity	$	448,940		$	542,400			Retained earnings		84,572			66,831

rev: 11_27_2019_QC_CS-192168

2a. 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 each companys 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.) 2b. Identify which companys stock you would recommend as the better investment.