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 Kyan Barco Kyan Company Company Company Company 905,200 648,500 Data from the current year-end balance sheets Data from the current year's income statement Assets Sales 770,000 $ 21,500 36,400 9,600 84,440 5,600 290,000 Cash 36,000 Cost of goods sold 591,100 Accounts receivable, net Current notes recelvable (trade) Merchandise inventory Prepaid expenses Plant assets, net 14,000 24,990 217,710 4.82 51,400 8,200 8,300 14,800 155,800 3.90 3.81 Interest expense Income tax expense Basic earnings per share Cash dividends per share 138,500 Net income 7,000 306,400 3.95 Total assets $447,540 $547,500 Beginning-of year balance sheet data Accounts receivable, net $ 28,800 58,200 0 Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value $ 61,340 $104,300 Current notes receivable (trade) 0 63,600 408,000 113,400 422,500 86,800 103,000 Merchandise inventory 226,000 Total assets 200,000 226,000 Retained earnings 99,400 114,200 Common stock, $5 par value 200,000 Total liabilities and equity $447,540 $547,500 Retained earnings 96,000 75,030

Explanation / Answer

a)

Current ratio = Current assets/Current liabilities

Barco:

= $21,500 + $36,400 + $9,600 + $84,440 + $5,600/$61,340

= $157,540/$61,340

= 2.57 to 1

Kyan:

= $36,000 + $51,400 + $8,200 + $138,500 + $7,000/$104,300

= $241,100/$104,300

= 2.31 to 1

b)

Acid-Test ratio = Current assets without merchandise inventory/Current liabilities

Barco:

= $21,500 + $36,400 + $9,600 + $5,600/$61,340

= $73,100/$61,340

= 1.19 to 1

Kyan:

= $36,000 + $51,400 + $8,200 + $7,000/$104,300

= $102,600/$104,300

= 0.98 to 1

c)

Accounts receivable turnover = Sales/Accounts receivable

Barco:

= $770,000/$36,400

= 21.15 times

Kyan:

= $905,200/$51,400

= 17.61 times

d)

Inventory turnover = Sales/Merchandise Inventory

Barco:

= $770,000/$84,440

= 9.12 times

Kyan:

= $905,200/$138,500

= 6.54 times

e)

Day’s sales in inventory = Merchandise inventory/Cost of goods sold*365 days in a year

Barco:

= $84,440/$591,100*365 days

= 52.14 or 52 days

Kyan:

= $138,500/$648,500*365 days

= 77.95 or 78 days

f)

Days’ sales uncollected = Accounts receivable/Net sales*365 days in a year

Barco:

= $36,400/$770,000*365 days

= 17.25 or 17 days

Kyan:

= $51,400/$905,200*365 days

= 20.73 or 21 days

Note: Please post the remaining question separately.

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