Question

Required information Problem 13-5A Comparative ratio analysis LO A1, P3 (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 Data from the current year's income statement Kyan Сопpany Data from the current year-end balance sheets Assets Cash $780,000 $905, 200 644,500 17,000 24,990 218,710 4.84 Sales $ 19,500 $ 37,000 55,400 8,000 132,500 7,650 304,400 $468,640 $544,950 Cost of goods sold Interest expense Income tax expense Net income Basic earnings per share Cash dividenda per share 585,100 8,100 Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses Plant assets, net 39,400 9,800 84,640 14,992 171,808 5.05 5,300 310,000 3.73 4.00 Total assets Beginning-of-year balance sheet data Accounts receivable, net Current notes receivable (trade) Merchandise inventory Total assets Liabilities and Equity $ 28,800 $ 56,200 $ 69,340 $ 95,300 103,000 226,000 120,650 Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings 61,600 418,000 170,000 113,400 372,500 226,000 82,800 170,000 146,500 Common stock, $5 par value Total liabilities and equity $468,640 $544,950 Retained earnings 101,512 82,740 Problem 13-5 Part 2 2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, () return on total assets, and (d) return on common stockholders' equity. Assuming that share and each company's stock can be purchased at $100 per share, compute their (e) price- earnings ratios and () dividend yields. (Do not round intermediate calculations. Round your answers to 2 decimal places.) 2h. Identifv which comnanv's stock vnu wnuld rerommend as the hetter invectment < Prev of 5 Next>

Answer 1

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Income Statement	Barco	Kyan		Answer 2 a	Barco	Kyan
Sales	780,000.00	905,200.00		Profit margin %	22.0%	24.2%
Cost of goods sold	585,100.00	644,500.00		Net Income/Net Sales
Gross Profit	194,900.00	260,700.00
Interest Expense	8,100.00	17,000.00		Total Assets Turnover Ratio	1.8	2.0
Income before taxes	186,800.00	243,700.00		Sales Revenue/Average Assets
Income tax expense	14,992.00	24,990.00
Net Income	171,808.00	218,710.00		Return on Total Assets	36.7%	40.1%
Basic Earnings per share	5.05	4.84		Net Income/Total Assets
Cash Dividends per share	3.73	4.00
				Return on Common Stock holders Equity	54.3%	63.1%
Balance Sheets				Net Income/Common Stock holders Equity
Assets	Barco	Kyan
Current Assets				Price Earnings Ratio	19.8	20.7
Cash	19,500.00	37,000.00		Market Price Per Share/ Earnings Per share on Common Stock
Accounts Receivable (net)	39,400.00	55,400.00
Current Notes Receivable (trade)	9,800.00	8,000.00		Dividend Yield	3.7%	4.0%
Merchandise Inventory	84,640.00	132,500.00		Dividend Per share on Common Stock/ Market Price Per Share
Prepaid Expenses	5,300.00	7,650.00
Total Current Assets	158,640.00	240,550.00		Answer 2 b
Plant assets, net	310,000.00	304,400.00		Remarks- Kyan is a better investment opportunity because all of the above ratios are better and more improved than Barco.
Total Assets	468,640.00	544,950.00
				Kyan	Current	Last Year
Liabilities & Stockholders' Equity				Accounts Receivable (net)	55,400.00	56,200.00
Liabilities				Current Notes Receivable (trade)	8,000.00	-
Current Liabilities	69,340.00	95,300.00		Average Receivable (net)	59,800.00
Long Term Note payable	82,800.00	103,000.00
Total Liabilities	152,140.00	198,300.00		Merchandise Inventory	132,500.00	113,400.00
Common Stock	170,000.00	226,000.00		Average Inventory	122,950.00
Retained Earnings	146,500.00	120,650.00
Total Stockholders' Equity	316,500.00	346,650.00		Total assets	544,950.00	372,500.00
Total Liabilities & Stockholders' Equity	468,640.00	544,950.00		Average assets	458,725.00
Total Current Assets	158,640.00	240,550.00
Less:
Inventory	84,640.00	132,500.00
Prepaid Expense	5,300.00	7,650.00
Quick Assets	68,700.00	100,400.00
Barco	Current	Last Year
Accounts Receivable (net)	39,400.00	28,800.00
Current Notes Receivable (trade)	9,800.00	-
Average Receivable (net)	39,000.00
Merchandise Inventory	84,640.00	61,600.00
Average Inventory	73,120.00
Total assets	468,640.00	418,000.00
Average assets	443,320.00