Problem 13-5A (Algo) Comparative ratio analysis LO P3

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Summary information from the financial statements of two companies competing in the same industry follows.

Barco Company KyanCompany Barco Company Kyan Company

Data from the current year-end balance sheets Data from the current year's income statement

Assets Sales

$790,000 $913,200

Cash $19,000 $32,000 Cost of goods sold 590,100 642,500

Accounts receivable, net38,400 55,400 Interest expense 8,900 15,000

Merchandise inventory 84,440 136,500 Income tax expense 15,185 25,211

Prepaid expenses 5,200 7,150 Net income 175,815 230,489

Plant assets, net 290,000 311,400 Basic earnings per share 5.49 4.68

Total assets $437,040 $542,450 Cash dividends per share 3.71 3.95

Liabilities and Equity Beginning-of-year balance sheet data

Current liabilities $65,340 $98,300 Accounts receivable, net $26,800 $53,200

Long-term notes payable86,800 115,000 Merchandise inventory 65,600 109,400

Common stock, $5 par value 160,000 246,000 Total assets 408,000 372,500

Retained earnings 124,900 83,150 Common stock, $5 par value 160,000 246,000

Total liabilities and equity. $437,040 $542,450 Retained earnings 67,805 47,001

Problem 13-5A (Algo) Part 1

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.

Complet this question by entering your answers in the tabs below.

• 1A Current Ratio

For both companies compute the current ratio.

(a) Current Ratio

CompanyChoose Numerator: / Choose Denominator: = Current Ratio

Net sales / = Current ratio

Barco / = 0 to 1

Kyan / = 0 to 1

1A Acid Test Ratio

For both companies compute the acid-test ratio.

(b) Acid-Test Ratio

Company Choose Numerator: Choose Denominator: = Acid-Test Ratio

+ + / =Acid-test ratio

Barco + + / =0 to 1

Kyan + + / =0 to 1

1A Acct Rec Turn

For both companies compute the accounts (including notes) receivable turnover.

(c) Accounts Receivable Turnover

CompanyChoose Numerator: / Choose Denominator: = Accounts Receivable Turnover

/ = Accounts receivable turnover

Barco / = 0 times

Kyan / = 0 times

1A Invent Turnover

For both companies compute the inventory turnover.

(d) Inventory TurnoverCompany

Choose Numerator: / Choose Denominator: = Inventory Turnover

/ = Inventory turnover

Barco / = 0 times

Kyan / = 0 times

1A Days Sal in Inv

For both companies compute the days' sales in inventory.

(e) Days' Sales in Inventory

Company Choose Numerator: / Choose Denominator: x Days = Days' Sales in Inventory

/ x = Days' sales in inventory

Barco / x = 0 days

Kyan / x = 0 days

1A Days Sal Uncol

For both companies compute the days' sales uncollected.

(f) Days' Sales Uncollected

Company Choose Numerator: / Choose Denominator: x Days = Days' Sales Uncollected

/ x = Days' sales uncollected

Barco / x = 0 days

Kyan / x = 0 days

• 1B short term

Identify the company you consider to be the better short-term credit risk.

Better short-term credit risk. ---------------------------------

Problem 13-5A (Algo) Part 2

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 company's 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 company's stock you would recommend as the better investment.

Complet this question by entering your answers in the tabs below.

2A Prof Mar Ratio

For both companies compute the profit margin ratio.

(a) Profit Margin Ratio

Company Choose Numerator: / Choose Denominator: = Profit margin ratio

/ = Profit margin ratio

Barco / = 0%

Kyan / = 0%

2A Tot Asset Turn

For both companies compute the total asset turnover

(b) Total Asset Turnover

Company Choose Numerator: / Choose Denominator: = Total Asset Turnover

/ = Total asset turnover

Barco / = 0 times

Kyan / = 0 times

2A Ret on Tot Assets

For both companies compute the return on total assets.

(c) Return on Total Assets

Company Choose Numerator: / Choose Denominator: = Return on Total Assets

/ = Return on total assets

Barco / = 0%

Kyan / = 0%

2A Ret On Com Stock

For both companies compute the return on common stockholders' equity.

(d) Return On Common Stockholders' Equity

Company Choose Numerator: / Choose Denominator = Return On Common Stockholders' Equity

- / = Return On common stockholders' equity

Barco - / = 0%

Kyan - / = 0%

2A Price Earn Ratio

Assuming that share and each company's stock can be purchased at $85 per share, compute their price-earnings ratios.

(e) Price-Earnings Ratio

Company Choose Numerator: / Choose Denominator: = Price-Earnings Ratio

/ = Price-earnings ratio

Barco / = 0 times

Kyan / = 0 times

2A Div Yield

Assuming that each company's stock can be purchased at$85 per share, compute their dividend yields.

(f) Dividend Yield

Company Choose Numerator: / Choose Denominator: = Dividend Yield

/ = Dividend yield

Barco / = 0%

Kyan / = 0%