Summary information from the financial statements of two companies competing in the same industry follows. Barco Kyan Barco Kyan Company Company Company Company Data from the current year-end balance sheets Data from the current year's income statement Assets Sales $770,000 $913,200 Cash $ 20,000 $ 32,000 Cost of goods sold 583, 100 638,500 Accounts receivable, net 34,400 51,400 Interest expense 7,700 14,000 Merchandise inventory 84,740 142,500 Income tax expense 14,800 25,211 Prepaid expenses 6,000 7,650 Net income 164,400 235,489 Plant assets, net 310,000 303,400 Basic earnings per share 4.33 4.99 Total assets $455, 140 $536,950 Cash dividends per share 3.70 3.97 Liabilities and Equity Current liabilities $ 71,340 $ 90,300 Long-term notes payable 86,800 115,000 Common stock, $5 par value 190,000 236,000 Retained earnings 107,000 95,650 Total liabilities and $455, 140 $536,950 equity Beginning-of-year balance sheet data Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings $ 27,800 $ 58,200 63,600 115,400 408,000 402,500 190,000 236,000 83,200 47,545 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 (7 days' sales uncollected. (Do not round intermediate calculations.) 1b. Identify the company you consider to be the better short-term credit risk. 1A Current 1A Acid Test 1A Acct Rec Ratio Ratio Turn 1A Invent Turnover 1A Days Sal 1A Days Sal in Inv Uncol 1B short term For both companies compute the current ratio. Current Ratio (a) Company Choose Numerator: 1 Choose Denominator: = Current Ratio = Current ratio 1 Barco / to 1 Kyan = to 1 (b) Acid-Test Ratio Company Choose Numerator: Choose Denominator: Acid-Test Ratio Acid-test ratio + + / II 11 Barco + + / to 1 Kyan + + / to 1 (c) Accounts Receivable Turnover Company Choose Numerator: 1 Choose Denominator: Accounts Receivable Turnover / = Accounts receivable turnover Barco 1 II o times Kyan / 0 times For companies Compute the Inventory turnover. Inventory Turnover (d) Company Choose Numerator: 1 Choose Denominator: = Inventory Turnover = Inventory turnover 1 Barco 1 II o times Kyan 1 0 times For both companies compute the days' sales in inventory. (e) Company Choose Numerator: Days' Sales in Inventory 1 Choose Denominator: x Days 1 = Days' Sales in Inventory = Days' sales in inventory 0 days 0 days Barco 1 = Kyan / = For both companies compute the days' sales uncollected. (f) Company Choose Numerator: Days' Sales Uncollected 1 Choose Denominator: x Days = Days' Sales Uncollected = Days' sales uncollected 1 Barco / X x II 0 days 0 days Kyan 1
