Required information The following information applies to the questions displaye

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Required information The following information applies to the questions displayed below] Summary information from the financial statements of two companies com competing in the same industry follows Barco Company Company Kyan BarcoKyan Company Company Data from the current year-end balance sheets Assets Cash Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses Plant assets, net Total assets Data from the current year's income statement Sales $770,000 $918,280 584,180 6405ee 8,800 15,880 14,800 25,349 162,380 237,351 76 3.95 20,500 $ 32,000 Cost of goods sold 35,400 57,400 Interest expense 9,700 8,000 Income tax expense 84,440 136,500 Net income 5,200 6,950 Basic earnings per share 310,800 313,400 Cash dividends per share 4.51 3.73 $465,240 $554,250 Beginning-of-year balance sheet data Accounts receivable, net Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value s 25,880 s 56,289 70,340 $101,300 Current notes receivable (trade) 85,800 117,000 Merchandise inventory 180,800 206,000 Total assets 129,100 129,950 Common stock, $5 par value 53,600 107 1400 398,000 372,500 18e,000 286,eee 101,e8055,339 tained earnings Total liabilities and equity $465,240 $554,250 Retained earnings Required: 1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (d) accounts (including notes) receivable turnover. (d) inventory turnover, (e) days' sales in inventory, and (1 days' sales uncollected. (Do not round intermediate calculations.) 1b. Identify the company you consider to be better short-term credit risk Complete this question by entering your answers in the tabs below IA Invent IA Davs Sal in 1A Davs Sal K Prex 1A Current 1A Acid Test 1A Acct Rec

Explanation / Answer

1a.

(20500+35400+9700+84440+5200)/70340 = 2.21 times

(32000+57400+8000+136500+6950)/101300 = 2.38 times

770000/30600* = 25.16

*(25800+35400)/2=30600

918200/56800* = 16.17

*(56200+57400)/2=56800

584100/69020* = 8.46

*(53600+84440)/2=69020

640500/121950* = 5.25

*(107400+136500)/2=121950

1b. Comparison between companies

S.No. Ratio Barco Kyan 1 Current ratio = Current Asset/Current Liablities

(20500+35400+9700+84440+5200)/70340 = 2.21 times

(32000+57400+8000+136500+6950)/101300 = 2.38 times

2 Quick ratio = Total Current Asset-Inventroy-Prepaid Expense/Current Liabalities {(20500+35400+9700+84440+5200)-5200-84440}/70340 = 0.93 {(32000+57400+8000+136500+6950)-6950-136500}/101300 = 0.96 3 Account Receivable Turnover Ratio=Net Credit Sales/Average Accounts Receivable

770000/30600* = 25.16

*(25800+35400)/2=30600

918200/56800* = 16.17

*(56200+57400)/2=56800

4 Inventory turnover= Cost of Goods Sold/Average Inventory

584100/69020* = 8.46

*(53600+84440)/2=69020

640500/121950* = 5.25

*(107400+136500)/2=121950

5 Number of days’ sales in inventory=Ending Inventory/Cost of Goods Sold*365 84440/584100 = 52.77 days 136500/640500 = 77.79 days 6 Days sales uncollected=Accounts receivable ÷ Net annual credit sales) x 365 (35400/770000)*365 = 16.78 days (57400/918200)*365 = 22.82 days

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