Problem 17-5A 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 an Company Company Data from the current year-end balance sheets Assets Cash S 19,000 $ 34,000 Accounts receivable, net 33,400 54,400 Current notes receivable (trade) Merchandise inventory 9,800 8,800 84,840 130,500 Prepaid expenses 6,100 7,650 Plant assets, net 340,000 310,400 Total assets 493,140 $ 545,750 Liabilities and Equity Current liabilities S 69,340 S 96,300 Long-term notes payable 105,000 79,800 Common stock, $5 par value 170,000 206,000 Retained earnings 138,450 174,000 493,140 $ Total liabilities and equity 545,750 Data from the current year's income statement Sales 780,000 S 921,200 Cost of goods sold 588,100 644,500 Interest expense 8,400 13,000 Income tax expense 25,432 14,992 Net income 238,268 168,508 Basic earnings per share 4.96 5.78 Cash dividends per share 3.75 4.01 Beginning-of-year balance sheet data Accounts receivable, net 26,800 S 51,200 Current notes receivable (trade) Merchandise inventory 0 0 107,400 57,600 Total assets 448,000 412,500 Common stock, $5 par value Retained earnings 170,000 206,000 65,394 132,992 Problem 17-5 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 (j days' sales uncollected. (Do not round intermediate calculations.) 1b. Identify the company you consider to be better short-term credit risk. Complete this question by entering your answers in the tabs below. 1A Current 1A Acid Test 1A Acct Rec 1A Invent 1A Days Sal in 1A Days Sal Uncol Req 1B Ratio Ratio Turn Turnover Inv For both companies compute the current ratio (a) Current Ratio /Choose Denominator: Company Choose Numerator Current Ratio Current ratio Barco to 1 yan to 1 II II Complete this question by entering your answers in the tabs below. 1A Acid Test Ratio 1A Days Sal Uncol 1A Current 1A Acct Rec 1A Invent 1A Days Sal in Inv Req 1B Ratio Turn Turnover For both companies compute the acid-test ratio. (b) Acid Test Ratio Acid-Test Ratio Company Choose Numerator: Choose Denominator: Acid-test ratio + to 1 Barco to Kyan + Complete this question by entering your answers in the tabs below. 1A Current 1A Acid Test 1A Acct Rec 1A Invent 1A Days Sal in 1A Days Sal Req 1B Ratio Ratio Turn Turnover Inv Uncol For both companies compute the accounts (including notes) receivable turnover. (c) Accounts Receivable Turnover Choose Company Numerator: Choose Denominator: Accounts Receivable Turnover Accounts receivable turnover times Barco Kyan times Complete this question by entering your answers in the tabs below. 1A Current 1A Acid Test 1A Acct Rec 1A Invent 1A Days Sal in 1A Days Sal Uncol Req 1B Ratio Ratio Turn Turnover Inv For both companies compute the inventory turnover. (d) Inventory Turnover IChoose Denominator: Inventory Turnover Company Choose Numerator: Inventory turnover times = Barco yan times Complete this question by entering your answers in the tabs below. 1A Days Sal in 1A Days Sal Uncol 1A Current Ratio 1A Acid Test 1A Acct Rec 1A Invent Req 1B Ratio Turn Turnover Inv For both companies compute the days' sales in inventory. (e) Days' Sales in Inventory IChoose Denominator: Company Choose Numerator: Days =Days' Sales in Inventory =Days' sales in inventory X days Barco X - yan days Y xx 1A Days Sal in 1A Current 1A Acid Test 1A Acct Rec 1A Invent 1A Days Sal Uncol Req 1B Ratio Ratio Turn Turnover Inv For both companies compute the days' sales uncollected (f) Days' Sales Uncollected IChoose Denominator: CompanyChoose Numerator: Days' Sales Uncollected X Days Days' sales uncollected / X Barco days X days yan X II Complete this question by entering your answers in the tabs below. 1A Current 1A Acid Test 1A Acct Rec 1A Invent 1A Days Sal in 1A Days Sal Req 1B Ratio Ratio Turn Turnover Inv Uncol Identify the company you consider to be the better short-term credit risk. Better short-term credit risk Problem 17-5 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 share and each company's stock can be purchased at $85 per share, compute their (e) price- earnings ratios and ( 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 Complete this question by entering your answers in the tabs below. 2A Ret On 2A Pro Marg 2A Tot Asset 2A Ret on Tot 2A Price Earn Com Stock 2A Div Yield Req 2B Ratio Turn Assets Ratio Equity For both companies compute the profit margin ratio (a) Profit Margin Ratio IChoose Denominator: Company Choose Numerator Profit margin ratio Profit margin ratio Barco yan Complete this question by entering your answers in the tabs below. 2A Ret On 2A Pro Marg 2A Price Earn 2A Tot Asset 2A Ret on Tot 2A Div Yield Req 2B Com Stock Ratio Turn Assets Ratio Equity For both companies compute the total asset turnover (b) Total Asset Turnover Total Asset Turnover Company Choose Numerator: Choose Denominator: Total asset turnover = Barco times Kyan times Complete this question by entering your answers in the tabs below. 2A Ret On 2A Pro Marg Ratio 2A Ret on Tot 2A Price Earn 2A Tot Asset Com Stock 2A Div Yield Req 2B Turn Assets Ratio Equity For both companies compute the return on total assets. (c) Return on Total Assets IChoose Denominator: Company Choose Numerator: Return on Total Assets Return on total assets Barco % | yan % II Complete this question by entering your answers in the tabs below. 2A Ret On Com Stock Equity 2A Pro Marg Ratio 2A Tot Asset 2A Ret on Tot 2A Price Earn Ratio 2A Div Yield Req 2B Turn Assets For both com panies compute the return on common stockholders' equity. (d) Return on Common Stockholders' Equity Choose Numerator: Choose Denominator Company =Return On Common Stockholders' Equity =Return On common stockholders' equity Barco % Kyan % Complete this question by entering your answers in the tabs below. 2A Ret On 2A Pro Marg 2A Tot Asset 2A Ret on Tot 2A Price Earn 2A Div Yield Req 2B Com Stock Ratio Turn Assets Ratio Equity Assuming that share and each company's stock can be purchased at $85 per share, compute their price-earnings ratios. (e) Price-Earnings Ratio IChoose Denominator: Company Choose Numerator: Price-Earnings Ratio Price-earnings ratio times Barco = yan times = II Complete this question by entering your answers in the tabs below. 2A Ret On 2A Pro Marg 2A Tot Asset 2A Ret on Tot 2A Price Earn Com Stock 2A Div Yield Req 2B Ratio Turn Assets Ratio Equity Identify which company's stock you would recommend as the better investment The better investment