! Required information [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 $ 22,000 37,400 84,740 5,300 350,000 $ 499,440 Data from the current year-end balance sheets Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Total liabilities and equity $ 770,000 584,100 9, 100 14,800 162,000 4.76 $ 36,000 59,400 130,500 6,950 311,400 $ 544,250 $ 910,200 632,500 15,000 25, 128 237,572 5.77 Data from the current year's income statement Sales Cost of goods sold Interest expense Income tax expense Net income Basic earnings per share Cash dividends per share Beginning-of-year balance sheet data Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings 3.82 3.99 $ 60, 340 80,800 170,000 188,300 $ 499,440 $ 96,300 105,000 206,000 136,950 $ 544,250 $ 25,800 53,600 408,000 170,000 156,180 $ 54,200 117,400 402, 500 206,000 63,766 2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (C) return on total assets, and (d) return on equity. Assuming that each company's stock can be purchased at $75 per share, compute their (e) price-earnings ratios and ( dividend yields. 2b. Identify which company's stock you would recommend as the better investment. 2A Prof Mar Ratio 2A Tot Asset Turn 2A Ret on Tot Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Req 2B For both companies compute the profit margin ratio. (a) Company Profit Margin Ratio Denominator: Numerator: 1 Profit margin ratio Profit margin ratio 1 = Barco / = % Kyan / % 2A Prof Mar Ratio 2A Tot Asset Turn 2A Ret on Tot Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Reg 2B For both companies compute the total asset turnover (b) Company Total Asset Turnover Denominator: Numerator: 1 1 1 11 Total Asset Turnover Total asset turnover times times Barco 11 Kyan 1 II 2A Prof Mar Ratio 2A Tot Asset A Ret on Tot Turn Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Reg 2B For both companies compute the return on total assets. (c) Return on Total Assets Company Numerator: Denominator: = Return on Total Assets / Return on total assets Barco 1 = % Kyan 1 % 2A Prof Mar Ratio 2A Tot Asset Turn 2A Ret on Tot Assets LA Ret On Equity 2A Price Earn Ratio 2A Div Yield Reg 2B For both companies compute the return on equity. (d) Return On Equity Denominator Company Numerator: 1 Return On Equity / = Return On equity Barco / = % Kyan % 2A Prof Mar Ratio 2A Tot Asset Turn 2A Ret on Tot Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Reg 2B Assuming that share and each company's stock can be purchased at $75 per share, compute their price-earnings ratios. Price-Earnings Ratio Company Numerator: 1 Denominator: Price-Earnings Ratio Price-earnings ratio / - Barco times Kyan 1 = times 2A Prof Mar 2A Tot Asset Turn 2A Ret on Tot Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Ratio Reg 2B Assuming that each company's stock can be purchased at $75 per share, compute their dividend yields. (f) Dividend Yield Company Numerator: 1 Denominator: = Dividend Yield - Dividend yield Barco - % Kyan = % 2A Prof Mar Ratio 2A Tot Asset Turn 2A Ret on Tot Assets 2A Ret On Equity 2A Price Earn Ratio 2A Div Yield Req 2B Identify which company's stock you would recommend as the better investment. The better investment 2A Div Yield Req 2B >
