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Required information Skip to question [The following information applies to the questions displayed below.] Summary information from the financial statements of two companies competing in

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[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 $ 800,000 $ 884,200
Cash $ 19,500 $ 35,000 Cost of goods sold 591,100 630,500
Accounts receivable, net 36,400 52,400 Interest expense 8,800 18,000
Current notes receivable (trade) 9,500 7,600 Income tax expense 15,377 24,410
Merchandise inventory 84,440 128,500 Net income 184,723 211,290
Prepaid expenses 5,100 7,750 Basic earnings per share 4.86 4.89
Plant assets, net 290,000 305,400 Cash dividends per share 3.79 3.99
Total assets $ 444,940 $ 536,650
Beginning-of-year balance sheet data
Liabilities and Equity Accounts receivable, net $ 25,800 $ 57,200
Current liabilities $ 67,340 $ 98,300 Current notes receivable (trade) 0 0
Long-term notes payable 80,800 103,000 Merchandise inventory 59,600 111,400
Common stock, $5 par value 190,000 216,000 Total assets 448,000 392,500
Retained earnings 106,800 119,350 Common stock, $5 par value 190,000 216,000
Total liabilities and equity $ 444,940 $ 536,650 Retained earnings 66,097 80,428
Required:
1.1

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.)

1.2 Identify the company you consider to be better in managing short-term credit risk.
multiple choice
  • Barco company

  • Kyan company

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