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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
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 | ||
Data from the current year-end balance sheets | Data from the current years income statement | ||||
Assets | Sales | $ 770,000 | $ 918,200 | ||
Cash | $ 22,000 | $ 36,000 | Cost of goods sold | 595,100 | 636,500 |
Accounts receivable, net | 39,400 | 51,400 | Interest expense | 7,600 | 14,000 |
Merchandise inventory | 84,540 | 138,500 | Income tax expense | 14,800 | 25,349 |
Prepaid expenses | 5,500 | 7,700 | Net income | 152,500 | 242,351 |
Plant assets, net | 360,000 | 311,400 | Basic earnings per share | 4.77 | 5.13 |
Total assets | $ 511,440 | $ 545,000 | Cash dividends per share | 3.82 | 4.01 |
Liabilities and Equity | Beginning-of-year balance sheet data | ||||
Current liabilities | $ 66,340 | $ 94,300 | Accounts receivable, net | $ 25,800 | $ 57,200 |
Long-term notes payable | 81,800 | 109,000 | Merchandise inventory | 61,600 | 113,400 |
Common stock, $5 par value | 160,000 | 236,000 | Total assets | 428,000 | 402,500 |
Retained earnings | 203,300 | 105,700 | Common stock, $5 par value | 160,000 | 236,000 |
Total liabilities and equity | $ 511,440 | $ 545,000 | Retained earnings | 173,040 | 52,621 |
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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