Question

Barco Kyan Company Company Data from the current year-end balance sheets Assets Cash $ 19,000 $ 35,000 Accounts receivable, net 37,400 54,400 Merchandise inventory 84,340 134,500 Prepaid expenses 5,800 7,600 Plant assets, net 320,000 305, 400 Total assets $466,540 $536,900 Barco Kyan Company Company Data from the current year's income statement Sales $ 790,000 $901,200 cost of goods sold 591 100 640, 500 Interest expense 8,500 16,000 Income tax expense 15 185 24,879 Net income 175, 215 219,821 Basic earnings per share $.48 5.09 Cash dividends per share 3.78 4.01 Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Total liabilities and equity $ 68, 340 $101,300 82, 800 103,000 160,000 216,000 155,400 116, 600 $466,540 $536,900 Beginning-of-year balance sheet data Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings $ 32,800 $ 57,200 55,600 113, 400 438 000 402,300 160,000 216,000 101 145 70,011 2a. 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 each company's stock can be purchased at $70 per share, compute their (e) price- earnings ratios and ( dividend yields. (Do not round intermediate calculations. Round your answers to 2 decimal places.) 2b. Identify which company's stock you would recommend as the better investment. For both companies compute the profit margin ratio. Profit Margin Ratio Choose Denominator: Company Choose Numerator: = Profit margin ratio Profit margin ratio Barco Kyan For both companies compute the total asset turnover Total Asset Turnover 7 Choose Denominator: Company Choose Numerator: Total Asset Turnover Total asset turnover times Barco Kyan For both companies compute the return on total assets. Return on Total Assets Choose Denominator: Company Choose Numerator: = Return on Total Assets = Return on total assets Barco Kyan For both companies compute the return on common stockholders' equity. Return On Common Stockholders' Equity 1 Choose Denominator Company Choose Numerator: - Return On Common Stock - Return On common stockho Barco Kyan Assuming that share and cach company's stock can be purchased at $70 per share, compute their price-carnings ratios. Price-Earnings Ratio 7 Choose Denominator: Company Choose Numerator: = Price-Earnings Ratio = Price-earnings ratio 0 times 0 times Barco Kyan Assuming that each company's stock can be purchased at $70 per share, compute their dividend yields. (1) Company Dividend Yield I Choose Denominator: Choose Numerator: Dividend Yield Dividend yield Barco I Kyan

Answer 1

(2a) (0) Profit margin Ratio Company Choose Num erators / Choose Denominato = Profit margin ratio Net income Profit margin ratic Net sales & 175, 215 $ 790,000 22.17 $ 219,821 $ 901,200 24.39 Barco Kyan (6) Company I Choose Numerator. Il Net sales T/ Осно $ 790,000 / kyan I & 901,200 11 Total Asset Turnover Choose Denominator = Total AssetTurnover Average Total Total Asset Assets Turnovers $ 452,270 1,75 times & 469, 700 = 1.92 times Calculation: total assets = [(Beginning total assets & Ending total auets) = 27 Average total assen g Barco: Average total assets = 10$438,000 + $466,540) 27 - & 904, 540 = 2 = & 452,270 Kuan: Average total assets = [[$402, 500 t & 536,900) – 27 = $ 939,400 42 = $ 469,700

c) Retwin on Total Assets Company Choose Numerator / Choose Denominator - Return on Total Assets Net income Average total = Ret win on Total Assets Barco $ 175, 215 7 $ 452,270 38.74 Kyan / $ 219,821 111 $ 469, 700 46.80 Note: Average total assets are calculated in part (b)

Barco $ 175,215 (d) Retwin on Common stock holders' Equity Company Choose Numerator Choose TReturn on common Denominator Stockholders Equity Net Income - Preferred Average common Return on common Dividends Stockholders'equity Stockholders'equity $ 0 $ 288, 272 60.78 Kyan $ 219,82 - $0 11 & 309, 306 71.07 % Calculation Average common stock holders a l Beginning common stock + Beginning Retained Earningst Ending common stock & Ending Retained Earnings) : 2] Barco: [($ 160,000 + $ 101, 145+ $160,000 + $ 155,400)=2] = $576, 545 = 2 - $ 288, 272.5 or $288, 272 Kyan: [ { $216,000 + $ 70,011 + $216,000+ $116, 600)=2] 2 $ 618,6112 = & 309, 305.5 or $309,306

e Price - Choose Numerator Company Earnings Ratio choose Denominar tor: Earnings per a Share 5.48 Market Price per Common stock Price - Earnings Ratio Price - Earnings Ratio 12.77 times & 70 Barco Kyan 13.75 times & TO 5.09 Company Dividend Vields Choose Numerator Choose Denominator - Dividend Yield Annual cash dividend Earnings persone Dividend per share share Yield & 70 5.4 $ 4.01 7 $ 70 5.73 $ 3.78 Barco kyan I as the better (26) Kyan Company will be recommended Investment,