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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 $ 810,000 $ 902,200
Cash $ 20,000 $ 36,000 Cost of goods sold 590,100 644,500
Accounts receivable, net 35,400 50,400 Interest expense 9,000 14,000
Merchandise inventory 84,440 130,500 Income tax expense 15,569 24,907
Prepaid expenses 6,000 7,200 Net income 195,331 218,793
Plant assets, net 320,000 305,400 Basic earnings per share 4.44 5.06
Total assets $ 465,840 $ 529,500 Cash dividends per share 3.74 3.96
Liabilities and Equity Beginning-of-year balance sheet data
Current liabilities $ 67,340 $ 92,300 Accounts receivable, net $ 27,800 $ 50,200
Long-term notes payable 78,800 117,000 Merchandise inventory 59,600 111,400
Common stock, $5 par value 220,000 216,000 Total assets 398,000 392,500
Retained earnings 99,700 104,200 Common stock, $5 par value 220,000 216,000
Total liabilities and equity $ 465,840 $ 529,500 Retained earnings 68,929 56,479

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 (f) days sales uncollected. (Do not round intermediate calculations.) 1b. Identify the company you consider to be the better short-term credit risk.image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Current Ratio (a) Company Numerator: Denominator: Current Ratio 11 = Current ratio Barco = = 0 to 1 0 to 1 Kyan 1 II Acid-Test Ratio (b) Company Numerator: Denominator: Acid-Test Ratio 1 = Acid-test ratio Barco + + + / II oto 1 Kyan + + / 0 to 1 (c) Accounts Receivable Turnover Company Numerator: Denominator: = Accounts Receivable Turnover 1 = = Accounts receivable turnover Barco II 0 times Kyan 1 = 0 times Inventory Turnover (d) Company Numerator: Denominator: Inventory Turnover Inventory turnover = Barco = 0 times Kyan = = II 0 times (e) Company Days' Sales in Inventory. Denominator: Numerator: 1 X Days II = Days' Sales in Inventory Days' sales in inventory 1 X = Barco / x II = 0 days o days Kyan 11 = Days' Sales Uncollected (f) Company Numerator: / Denominator: X Days = Days' Sales Uncollected Days' sales uncollected 1 = = Barco 0 days Kyan II 0 days

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