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How to solve this? Summary information from the financial statements of two companies competing in the same industry follows. Barco Company Kyan Company Barco Company
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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 | $ | 790,000 | $ | 927,200 | |||||||||
Cash | $ | 18,500 | $ | 37,000 | Cost of goods sold | 588,100 | 642,500 | |||||||
Accounts receivable, net | 36,400 | 59,400 | Interest expense | 8,200 | 16,000 | |||||||||
Current notes receivable (trade) | 10,000 | 7,800 | Income tax expense | 15,185 | 25,597 | |||||||||
Merchandise inventory | 84,340 | 140,500 | Net income | 178,515 | 243,103 | |||||||||
Prepaid expenses | 5,900 | 7,700 | Basic earnings per share | 4.70 | 5.15 | |||||||||
Plant assets, net | 340,000 | 312,400 | Cash dividends per share | 3.77 | 4.02 | |||||||||
Total assets | $ | 495,140 | $ | 564,800 | ||||||||||
Beginning-of-year balance sheet data | ||||||||||||||
Liabilities and Equity | Accounts receivable, net | $ | 28,800 | $ | 57,200 | |||||||||
Current liabilities | $ | 67,340 | $ | 97,300 | Current notes receivable (trade) | 0 | 0 | |||||||
Long-term notes payable | 80,800 | 113,000 | Merchandise inventory | 59,600 | 115,400 | |||||||||
Common stock, $5 par value | 190,000 | 236,000 | Total assets | 388,000 | 392,500 | |||||||||
Retained earnings | 157,000 | 118,500 | Common stock, $5 par value | 190,000 | 236,000 | |||||||||
Total liabilities and equity | $ | 495,140 | $ | 564,800 | Retained earnings | 121,745 | 65,141 | |||||||
Required: 1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts (including notes) 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 better short-term credit risk.
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