Problem 13-5A Comparative ratio analysis LO A1, 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 years income statement
Assets								Sales	$	770,000		$	912,200
Cash	$	18,500		$	34,000			Cost of goods sold		593,100			644,500
Accounts receivable, net		35,400			60,400			Interest expense		8,800			13,000
Current notes receivable (trade)		9,500			7,000			Income tax expense		14,800			25,183
Merchandise inventory		84,840			132,500			Net income		153,300			229,517
Prepaid expenses		5,100			7,100			Basic earnings per share		3.65			4.66
Plant assets, net		340,000			308,400			Cash dividends per share		3.77			3.97
Total assets	$	493,340		$	549,400
								Beginning-of-year balance sheet data
Liabilities and Equity								Accounts receivable, net	$	29,800		$	51,200
Current liabilities	$	64,340		$	96,300			Current notes receivable (trade)		0			0
Long-term notes payable		81,800			115,000			Merchandise inventory		61,600			111,400
Common stock, $5 par value		210,000			246,000			Total assets		428,000			392,500
Retained earnings		137,200			92,100			Common stock, $5 par value		210,000			246,000
Total liabilities and equity	$	493,340		$	549,400			Retained earnings		142,240			57,907

Problem 13-5 Part 1

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.

1A Current 1A Acid Test Ratio 1A Days Sal Uncol 1A Acct Rec 1A Invent 1A Days Sal in Inv Turn Ratio Turnover For both companies compute the current ratio. Current Ratio Company Choose Numerator: I Choose Denominator: Current Ratio Current assets / Current liabilities Current ratio 0 to 1 0 to 1 Barco Kyan 1A Current1A Acid Test Ratio 1A Acct Rec 1A Invent 1A Days Sal in 1A Days Sa Turn Req 1B Ratio Turnover Inv Uncol For both companies compute the acid-test ratio. Acid-Test Ratio Acid-Test Ratio Company Choose Numerator: Choose Denominator: Short-term investmentsCurrent receivablesCurrent liabilities Acid-test ratio Cash Barco 0 to 1 Kyan O to 1 1A Current 1A Acid Test Ratio 1A Acct Rec1A Invent 1A Days Sal in 1A Days Sal Turn Req 1B Ratio Turnover Inv Uncol For both companies compute the accounts (including notes) receivable turnover. Accounts Receivable Turnover Accounts Receivable Turnover Company Choose Numerator: I Choose Denominator: Net sales Average accounts receivable, net Accounts receivable turnover Barco 0 times 0 times Kyan E1A Days Sal in Inv 1A Current 1A Acid Test 1A Acct Rec 1A Invent 1A Days Sal Uncol Turn Ratio Ratio Turnover For both companies compute the inventory turnover. Inventory Turnover Company Choose Numerator:Choose Denominator: = Inventory Turnover Cost of goods sold I Average inventory Inventory turnover 593,100/ 0 times Barco 644,500I 0 times Kyan 1A Invent 1A Days Sal in 1A Days Sal Inv 1A Current 1A Acid Test Ratio 1A Acct Rec Req 1B Turn Ratio Turnover Uncol For both companies compute the days' sales in inventory Days' Sales in Inventory Company Choose Numerator: Choose Denominator x Days Days' Sales in Inventory Merchandise inventory Cost of goods sold x 365 Days' sales in inventory 593,100> Barco days 644,500 x Kyan days 1A Current 1A Acid Test 1A Acct Rec 1A Invent 1A Days Sal in 1A Days Sal Ratio Req 1B Turn Ratio Inv Uncol Turnover For both companies compute the days' sales uncollected. Days' Sales Uncollected CompanyChoose Numerator: Choose Denominator: x DaysDays' Sales Uncollected Current receivables, net Net sales x [365 Days' sales uncollected 770,000 x Barco days 912,200x Kyan days