Summary information from the financial statements of two companies competing in

Question

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 year’s income statement Assets Sales $ 780,000 $ 889,200 Cash $ 21,500 $ 33,000 Cost of goods sold 589,100 638,500 Accounts receivable, net 36,400 50,400 Interest expense 8,300 16,000 Current notes receivable (trade) 9,100 8,800 Income tax expense 14,992 24,548 Merchandise inventory 84,640 138,500 Net income 167,608 210,152 Prepaid expenses 5,700 7,150 Basic earnings per share 3.81 4.86 Plant assets, net 350,000 307,400 Cash dividends per share 3.74 4.02 Total assets $ 507,340 $ 545,250 Beginning-of-year balance sheet data Liabilities and Equity Accounts receivable, net $ 27,800 $ 53,200 Current liabilities $ 67,340 $ 94,300 Current notes receivable (trade) 0 0 Long-term notes payable 79,800 105,000 Merchandise inventory 65,600 113,400 Common stock, $5 par value 220,000 216,000 Total assets 418,000 392,500 Retained earnings 140,200 129,950 Common stock, $5 par value 220,000 216,000 Total liabilities and equity $ 507,340 $ 545,250 Retained earnings 137,152 93,462

Problem 17-5 Part 2

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 share and each company’s stock can be purchased at $85 per share, compute their (e) price-earnings ratios and (f) dividend yields. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

2.1

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 share and each company’s stock can be purchased at $85 per share, compute their (e) price-earnings ratios and (f) dividend yields. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

2.2 Identify which company’s stock you would recommend as the better investment. Kyan company Barco company

Explanation / Answer

2.1

________________________________________________________________________________________

                                                                                         Barco Company                   Kyan company     

Less: Cost of Goods sold                                                    589,100                          638,500

Profit before tax                                                                 182,600                            234,700    

Less: Tax                                                                           (14,992)                          ( 24,548)

Profit after tax                                                                    167,608                          210,152

2. Common Stock holders Equity

3. Calculation of Market Price per share :

_______________________________________________________________________________________   

                                                                                                           Barco.com.                        Kyan com.       

Cost of Equity (Ke)= Dividend paid/Common Stock                            74.80%                                   80%  

Market price per share = Dividend per share/Ke                               3.74/74.8% = 5                  4.02/80% = 5.03

                                                      

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.