Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 $ 780,000 $ 884,200
Cash $ 20,500 $ 37,000 Cost of goods sold 588,100 644,500
Accounts receivable, net 33,400 60,400 Interest expense 7,800 18,000
Merchandise inventory 84,340 130,500 Income tax expense 14,992 24,410
Prepaid expenses 5,600 7,050 Net income 169,108 197,290
Plant assets, net 300,000 303,400 Basic earnings per share 4.70 4.79
Total assets $ 443,840 $ 538,350 Cash dividends per share 3.73 3.94
Liabilities and Equity Beginning-of-year balance sheet data
Current liabilities $ 63,340 $ 103,300 Accounts receivable, net $ 30,800 $ 52,200
Long-term notes payable 85,800 101,000 Merchandise inventory 63,600 107,400
Common stock, $5 par value 180,000 206,000 Total assets 428,000 382,500
Retained earnings 114,700 128,050 Common stock, $5 par value 180,000 206,000
Total liabilities and equity $ 443,840 $ 538,350 Retained earnings 79,872 93,088

rev: 06_19_2020_QC_CS-217192

2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on common stockholders equity. Assuming that each companys stock can be purchased at $105 per share, compute their (e) price-earnings ratios and (f) dividend yields. (Do not round intermediate calculations. Round your answers to 2 decimal places.) 2b. Identify which companys stock you would recommend as the better investment.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamental Accounting Principles Volume 2

Authors: John Wild, Ken Shaw, Barbara Chiappetta

21st Edition

0077716663, 978-0077716660

More Books

Students also viewed these Accounting questions

Question

What is the name of the program?

Answered: 1 week ago