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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 | $ 760,000 | $ 885,200 | ||
Cash | $ 21,500 | $ 37,000 | Cost of goods sold | 595,100 | 642,500 |
Accounts receivable, net | 37,400 | 57,400 | Interest expense | 9,100 | 10,000 |
Merchandise inventory | 84,740 | 140,500 | Income tax expense | 14,608 | 24,438 |
Prepaid expenses | 5,600 | 6,950 | Net income | 141,192 | 208,262 |
Plant assets, net | 310,000 | 308,400 | Basic earnings per share | 3.72 | 4.82 |
Total assets | $ 459,240 | $ 550,250 | Cash dividends per share | 3.81 | 4.01 |
Liabilities and Equity | Beginning-of-year balance sheet data | ||||
Current liabilities | $ 69,340 | $ 104,300 | Accounts receivable, net | $ 30,800 | $ 55,200 |
Long-term notes payable | 79,800 | 115,000 | Merchandise inventory | 61,600 | 109,400 |
Common stock, $5 par value | 190,000 | 216,000 | Total assets | 398,000 | 382,500 |
Retained earnings | 120,100 | 114,950 | Common stock, $5 par value | 190,000 | 216,000 |
Total liabilities and equity | $ 459,240 | $ 550,250 | Retained earnings | 123,688 | 79,920 |
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.
Note: Do not round intermediate calculations.
1b. Identify the company you consider to be the better short-term credit risk.
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