Subtitle Sul Paragraph Styles 4. The following summaries from the income statements and balance sheets of Necko, Inc. and Saxony, Inc. are presented below. (1) For both companies for 2014, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for 2014, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios? Necko. Inc. Consolidated Balance Sheets (in millions) May 31 2014 2013 Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowance Inventories Other current assets. Total current assets Property, plant, and equipment, net Other long term assets. Total assets $ 634.0 2,101.1 1,514.9 429.9 4,679.9 1,620.8 413.2 $6.713.2 $575,5 1,804.1 1,373.8 401.3 4,154.7 1,614.5 670.8 $6.440.0 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt. Notes payable.... Accounts payable Accrued liabilities Income taxes payable Total current liabilities Long term liabilities Total liabilities Stockholders' equity: Common stock Contributed capital in excess of par value Unearned stock compensation Accumulated other comprehensive loss Retained earnings.. Total stockholders' equity Total liabilities and stockholders' equity $ 205.7 75.4 572.7 1,054.2 107.2 2.015.2 7080 2.723.2 s 55.3 425.2 504.4 765.3 83.0 1,833.2 767.8 2.601.0 2.8 589.0 (0.6) (239.7) 3,639.2 3.990.7 56,713.2 2.8 538.7 (5.1) (192.4) 3.495.0 3.839.0 56.440.0 Nesko, Inc. Consolidated Statement of Income May 31, 2014 (in millions) Revenues. Cost of sales Gross profit Operating expenses Operating income Interest expense... Other revenues and expenses Income before tax Income taxes Income before effect of accounting change. Cumulative effect of accounting change, net of tax Net income $10,697.0 6.313.6 4,383.4 3.137.6 1,245.8 42.9 79.9 1.123.0 382.9 740.1 266.1 474.0 Saxony, Inc. Consolidated Balance Sheets Jan. 3, 2014 Jan. 4, 2013 Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowance Inventories Other current assets. Total current assets Property, plant, and equipment, net. Other long term assets... Total assets..... $34.5 15.5 27.2 3.5 80.7 5.7 1.1 $87.5 $22.2 14.7 28.4 4.2 69.5 7.0 1.5 $78.0 Liabilities and Stockholders' Equity S 8.5 7.8 16.3 2.5 18.8 $ 6.6 5.6 12.2 2.6 14.8 Current liabilities: Accounts payable. Accrued liabilities Total current liabilities. Long term liabilities. Total liabilities Stockholders' equity: Common stock Contributed capital in excess of par value Unearned stock compensation Accumulated other comprehensive loss Treasury stock...... Retained earnings Total stockholders' equity Total liabilities and stockholders' equity... 2.3 17.8 (0.1) (0.9) (6.3) 55.9 68.7 S87.5 2.3 17.4 (0.5) (1.3) (5.4) 50.7 63.2 S78.0 Saxony, Inc. Consolidated Statement of Income January 3, 2014 (in millions) Revenues.. Cost of sales. Gross profit Operating expenses. Operating income Interest expense.... Other revenues and expenses Income before tax Income taxes Net income....... $133.5 87.3 46.2 37.3 8.9 (0.1) 0.3 9.1 3.9 $ 5.2 1