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[The following information applies to the questions displayed below.] Summary information from the financial statements of two companies competing in the same industry follows. Barco
[The following information applies to the questions displayed below.]
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 | $ 925,200 | ||
Cash | $ 20,500 | $ 32,000 | Cost of goods sold | 590,100 | 634,500 |
Accounts receivable, net | 38,400 | 58,400 | Interest expense | 8,300 | 15,000 |
Merchandise inventory | 85,040 | 138,500 | Income tax expense | 14,992 | 25,542 |
Prepaid expenses | 6,100 | 7,700 | Net income | 166,608 | 250,158 |
Plant assets, net | 350,000 | 307,400 | Basic earnings per share | 4.38 | 6.38 |
Total assets | $ 500,040 | $ 544,000 | Cash dividends per share | 3.74 | 3.92 |
Liabilities and Equity | Beginning-of-year balance sheet data | ||||
Current liabilities | $ 69,340 | $ 98,300 | Accounts receivable, net | $ 27,800 | $ 56,200 |
Long-term notes payable | 80,800 | 113,000 | Merchandise inventory | 55,600 | 105,400 |
Common stock, $5 par value | 190,000 | 196,000 | Total assets | 448,000 | 392,500 |
Retained earnings | 159,900 | 136,700 | Common stock, $5 par value | 190,000 | 196,000 |
Total liabilities and equity | $ 500,040 | $ 544,000 | Retained earnings | 135,412 | 40,206 |
Problem 17-5A (Algo) Part 1
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 (f) days sales uncollected.
Note: Do not round intermediate calculations.
1b. Identify the company you consider to be the better short-term credit risk.
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