Summary information from the financial statements of two companies competing in the same industry follows. Barco Kyan Company Company Data from the current year-end balance sheets Assets Cash $ 22,000 $ 36,000 Accounts receivable, net 36,400 55,400 Merchandise inventory 84,740 132,500 Prepaid expenses 5,600 7,100 Plant assets, net 290,000 304,400 Total assets $438,740 $535,400 Barco Kyan Company Company Data from the current year's income statement Sales $770,000 $909, 200 Cost of goods sold 593,100 632,500 Interest expense 7,900 10,000 Income tax expense 14,800 125,100 Net income 154,200 241,600 Basic earnings per share 4.54 | 5.12 Cash dividends per share 3.74 4.01 Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Total liabilities and equity Beginning-of-year balance sheet data $ 61,340 $ 97,300 Accounts receivable, net 82,800 113,000 Merchandise inventory 170,000 236,000 Total assets 124,600 89, 100 Common stock, $5 par value $438,740 $535,400 Retained earnings $ 32,800 $ 157,200 61,600 117,400 448,000 412,500 170,000 236,000 97,560 36,772 Required: 1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (a) inventory turnover, (e) days' sales in inventory, and (6 days' sales uncollected. (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 Ratio 1A Acid Test Ratio 1A Acct Rec Turn 1A Invent Turnover 1A Days Sal in Inv 1A Days Sal Uncol 1B short term For both companies compute the current ratio. Current Ratio (a) Company Choose Numerator: | Choose Denominator: II Current Ratio 1 II Current ratio Barco / II to 1 Kyan / to 1 1A Current Ratio 1A Acid Test Ratio For both companies compute the acid-test ratio. Acid-Test Ratio (b) Company Choose Numerator: Choose Denominator: Acid-Test Ratio + + Acid-test ratio Barco + + to 1 Kyan + + to 1 For both companies compute the accounts (including notes) receivable turnover. (c) Accounts Receivable Turnover Company Choose Numerator: 1 Choose Denominator: Accounts Receivable Turnover 1 = Accounts receivable turnover Barco / times Kyan 1 = times For both companies compute the inventory turnover. (d) Inventory Turnover Company Choose Numerator: / Choose Denominator: = Inventory Turnover Inventory turnover / II Barco 1 = times Kyan 1 times For both companies compute the days' sales in inventory. Days' Sales in Inventory (e) Company Choose Numerator: 1 Choose Denominator: Days / = Days' Sales in Inventory = Days' sales in inventory days days Barco / Kyan / For both companies compute the days' sales uncollected. (f) Days' Sales Uncollected Company Choose Numerator: I Choose Denominator: x Days = Days' Sales Uncollected / = Days' sales uncollected Barco / = = days Kyan / days Identify the company you consider to be the better short-term credit risk. Better short-term credit risk
