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 $ 926,200 Cash $ 22,000 $ 34,000 Cost of goods sold 590,100 636,500 Accounts receivable, net 39,400 51,400 Interest expense 7,500 15,000 Merchandise inventory 84,440 136,500 Income tax expense 14,800 25,570 Prepaid expenses 5,700 7,150 Net income 157,600 249,130 Plant assets, net 330,000 305,400 Basic earnings per share 3.75 5.28 Total assets $ 481,540 $ 534,450 Cash dividends per share 3.76 3.92 Liabilities and Equity Beginning-of-year balance sheet data Current liabilities $ 67,340 $ 103,300 Accounts receivable, net $ 28,800 $ 56,200 Long-term notes payable 82,800 113,000 Merchandise inventory 59,600 107,400 Common stock, $5 par value 210,000 236,000 Total assets 428,000 392,500 Retained earnings 121,400 82,150 Common stock, $5 par value 210,000 236,000 Total liabilities and equity $ 481,540 $ 534,450 Retained earnings 121,720 18,044 2a.

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 companys stock can be purchased at $95 per share, compute their (e) price-earnings ratios and (f) dividend yields.

2b. Identify which companys stock you would recommend as the better investment.