Question

Required information [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 Barco Company Kyan Company Kyan 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 $ 19,5ee 39,4ee le.eee 84,340 5,700 35e,eee $ 508,940 $ 30,eee 58,4ee 7.480 138,5ee 7,450 34, 4ee $546, 150 Data from the current year's income statement Sales Cost of goods sold Interest expense Income tax expense Net income Basic earnings per share Cash dividends per share $ 770,000 586,100 8,600 14,300 160,5ee 4.72 3.30 2,2 636) See 13,000 24907 227,793 $.81 3.97 $ 52,200 Liabilities and Equity Current liabilities Long-ters notes payable Common stock, 55 par value Retained earnings Total liabilities and equity $ 64,340 $ 101,300 94, see 1eg,eee 17e, eee 196,eee 189,80 139,85e S508.540 546.15e Beginning-of-year balance sheet data Accounts receivable, net Current notes receivable (trade) Merchandise inventory Total assets Common stock, 55 par value Retained earnings $ 26,800 @ 61,600 425,000 170,000 153,500 107|400 392,500 196eee 67.681 Required: 1o. For both companies compute the (a current ratio, (b) acid-test ratio, (accounts (including notes) receivable turnover, (dInventory turnover, le 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

Answer 1

La) Company Current Ratio Current Choose Numerator / Choose Denominator = Ratio Current assets / Current liabilities - Current Ratio Barco $ 158,940 / $ 64,340 = 2.47 to 1 kyan 1 $ 241750 / $ 101,300 = 2.39 to 1 Calculation. Current assets = (Cash & Accounts Receivable, nett Current netes receivable & Merchandise Inventory & Prepaid expenses) Barco: Current assets = ($ 19,500 + $39,400 + $10,000 & $84,340 + $5,700) = $ 158,940 kyan? Current assets = ($30,000 & $58,400t $7400 t $138,500 + $ 7,450) - $241,750

lib, Company shost Acid- Test Ratio Choose Acid-Test Choose Numerator Denominator Ratio Current , Current rent Acid - Test Cash + term treceivables liabilities Ratio investments Barco $19.500 + $0 + $ 49,400 / $64,340 = 1:07 to I kyan $30,000+ $0 A $65,800 / $ 101,300=0.95 to 1 Calculation: Current receivables = (Accounts Receivable, net & Current notes. receivable) Barco: Current receivables = $39,400 + $10,000 - $49,400 kyan: Current receivables= $58,4001 $7,400 a $65,800 C) Comp Choose Numerator divable Turnover Net Sales Accounts Receivable Turnover / Choose Denominator = Accounts Receivable to Average accounts Accounts Receivable ? reerivable, net = Turnover = 20121 times 15:29 times Barco $ 770,000 $38,100 Kyan $902,200 $59.000 Calculation: Average Accounts Receivable, net & Accounts Receivable, net (Beginning accounts receivable & Ending accounts receivable + Beginning current notes receivable & Ending current notes receivable) ₃ 2 2 inning accounts receivable + Beginning current notes receivable & Ending Accounts Receivable & Ending current notes receivable) 2]

Barco? Average Accounts Receivable, net ($ 26,000+ $0 + $39,400 + $10,000) = 2 = $76,200 + 2 = $38,100 kyan? Average accounts receivable, net = ($52,200 + $0 + $58,400 + $ 7,400) : 2 - $ 118,000 - 2 - $ 59,000 ره) sebenominator Inventory 7 ernover Inventory Turnover Choose Numerator / Choose Denominator Company ca Cost of goods sold / Average inventory = Inventory Turnover Barco | $ 586,100 / $ 72,970 = 8.03 times a $636,500 Il $122,950 = 5.18 times calculation. Average inventory = (Beginning inventory & Ending inventory) & 2 Barco: Average inventory = ($ 61,600+ $84,340) - $ 145,940 = 2 = $72,970 Kyan: Average inventory = 107,400+ $138.500) = $245,900 - 2 = $ 122,950

Company Chordlandine Days Sales in Inventory T Choose Days Sales in Company Choose Numerator/ Denominator X Days 2 Inventory cost of goods v 365 Days' sales in - = Inventory sold Inventory / Barco $ 84,340 / $586,100 x 365 = 52.52 days kyan $138,500 $636, 500 x 365 = 79.42 days , costota ove Days" s Company Choose Company Days' sales Uncollected Choose Choose Days sales Numerator / Denominator X Days = Uncollected ne Current receivables / Net sales x 365 Days' sales = uncollected net $ 49,400 / $770,000 X 365 = 23.42 days & 65,800 118902, 200/X 365 = 26.62 days! Barco $902, kyan $ 65,800 Note: are calculated above Current receivables, net in part (b). I Retter short term credit risk Barco Company