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 year's income statement Assets Sales Cash $ 22,500 $ 38,000 Cost of goods sold $780,000 596,100 $ 906,200 634,500 Accounts receivable, net 35,400 60,400 Interest expense 7,800 13,000 84,540 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 5,400 350,000 7,800 303,400 $ 497,840 $ 550,100 $ 61,340 $ 101,300 81,800 109,000 210,000 216,000 144,700 123,800 $ 497,840 $ 550,100 Cash dividends per share Beginning-of-year balance sheet data Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings 140,500 Income tax expense 14,992 25,017 Net income 161,108 233,683 Basic earnings per share 3.84 5.41 3.72 3.96 $ 26,800 $ 52,200 53,600 113,400 408,000 362,500 210,000 216,000 139,832 61,189 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. Complete this question by entering your answers in the tabs below. 1A Current 1A Acid Test Ratio Ratio 1A Acct Rec Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv Uncol 1B short term For both companies compute the current ratio. (a) Company Barco Kyan Current Ratio Numerator: 1 Denominator: = Current Ratio 1 = Current ratio = to 1 || = to 1 1A Current Ratio 1A Acid Test 1A Acct Rec Ratio Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal 1B short term Inv Uncol For both companies compute the acid-test ratio. (b) Company Barco Numerator: + + + Kyan + + + Acid-Test Ratio Denominator: = Acid-Test Ratio Acid-test ratio < 1A Current Ratio 1A Acct Rec Turn > to 1 to 1 1A Current Ratio 1A Acid Test 1A Acct Rec Ratio Turn 1A Invent 1A Days Sal in Turnover Inv 1A Days Sal Uncol 1B short term For both companies compute the accounts (including notes) receivable turnover. (c) Company Numerator: Barco Kyan Accounts Receivable Turnover Denominator: Accounts Receivable Turnover = = Accounts receivable turnover < 1A Acid Test Ratio 1A Invent Turnover > times times 1A Current Ratio 1A Acid Test 1A Acct Rec Ratio Turn 1A Invent Turnover 1A Days Sal in 1A Days Sal Inv 1B short term Uncol For both companies compute the inventory turnover. (d) Company Inventory Turnover Numerator: I Denominator: = Inventory Turnover = Inventory turnover Barco Kyan = times = || times < 1A Acct Rec Turn 1A Days Sal in Inv > 1A Current 1A Acid Test 1A Acct Rec Ratio Ratio Turn 1A Invent Turnover 1A Days Sal in Inv 1A Days Sal Uncol 1B short term For both companies compute the days' sales in inventory. (e) Company Numerator: Barco Kyan Days' Sales in Inventory Denominator: Days Days' Sales in Inventory x = = Days' sales in inventory < 1A Invent Turnover 1A Days Sal Uncol > days days 1A Current 1A Acid Test 1A Acct Rec Ratio Ratio Turn 1A Invent Turnover 1A Days Sal in Inv 1A Days Sal Uncol 1B short term For both companies compute the days' sales uncollected. (f) Company Numerator: Days' Sales Uncollected Denominator: Barco Kyan Days II = II = = Days' Sales Uncollected Days' sales uncollected 1A Days Sal in Inv 1B short term > days days 1A Current 1A Acid Test Ratio Ratio 1A Acct Rec Turn 1A Invent 1A Days Sal in 1A Days Sal Turnover Inv Uncol 1B short term Identify the company you consider to be the better short-term credit risk. Better short-term credit risk < 1A Days Sal Uncol 1B short term