Question

of 2 Summary information from the financial statements of two companies competing in the same industry follows. Sales Barco Kyan Company Company Data from the current year-end balance sheets Assets Cash $ 22,500 $ 35,000 Accounts receivable, net 35,400 57.400 Merchandise inventory 84,840 128,500 Prepaid expenses 5.800 7,200 Plant annets, net 320,000 309, 400 Total anseta $468,540 $537,500 Barco Kyan Company Company Data from the current year's income statement $770,000 $879,200 cost of goods sold 587,100 32,500 Interest expense 8.400 10.000 Income tax expense 14,800 4.272 Net income 159,700 212,428 Base warnings per share 3.99 4.50 cash dividenda per share 3.77 4.01 Jook Yine rences Liabilities and Equity Current liabilities Long-term notes payable Common stock, 55 par value Retained earnings Total liabilities and equity $67.340 $ 96,300 78,800 117,000 200.000 236,000 122,400 88,200 $468,540 $537,500 Beginning-of-year balance sheet data counts receivable, net Merchandise inventory Total assets Common stock, 55 par value Retained earnings $ 27,000 63.600 388,000 200,000 113,500 $8,200 111,400 422.500 236,000 5,044

Answer 1

Part 1 A

	(a) Current Ratio Company Choose Numerator: / Choose Denominator: = Current Ratio Current assets / Current liabilities = Current ratio Barco $148540 / $67340 = 2.2 to 1 Kyan $228100 / $96300 = 2.4 to 1

Current assets = cash + accounts receivable + merchandise inventory + prepaid expenses

Barco = 22500+35400+84840+5800 = $148540

Kyan = 35000+57400+128500+7200 = $228100

(b) Acid-Test Ratio Company Choose Numerator: Choose Denominator: = Acid-Test Ratio Cash + Short-term investments + Current receivables / Current liabilities = Acid-test ratio Barco $22500 + + $35400 / $67340 = 0.9 to 1 Kyan $35000 + + $57400 / $96300 1.0 to 1

(c) Accounts Receivable Turnover Company Choose Numerator: / Choose Denominator: = Accounts Receivable Turnover Net sales / Average accounts receivable, net = Accounts receivable turnover Barco $770,000 / $31600 = 24.4 times Kyan $879,200 / $57800 = 15.2 times

Average accounts receivable, net = (beginning accounts receivable + ending accounts receivable)/2

Barco = (27800+35400)/2 = 31600

Kyan = (58200+57400)/2 = 57800

(d)	Inventory Turnover
Company	Choose Numerator:	/	Choose Denominator:	=	Inventory Turnover
	Cost of goods sold	/	Average inventory	=	Inventory turnover
Barco	$587100	/	$74220	=	7.9	times
Kyan	$632500	/	$119,950	=	5.3	times

Average inventory = (beginning inventory + ending inventory)/2

Barco = (63600+84840)/2 = 74220

Kyan = (111400+128500)/2 = 119950

(e)	Days’ Sales in Inventory
Company	Choose Numerator:	/	Choose Denominator:	x	Days	=	Days’ Sales in Inventory
	Merchandise inventory	/	Cost of goods sold	x	365	=	Days’ sales in inventory
Barco	$84,840	/	$587100	x	365	=	52.7	days
Kyan	$128500	/	$632500	x	365	=	74.2	days

(f)	Days' Sales Uncollected
Company	Choose Numerator:	/	Choose Denominator:	x	Days	=	Days' Sales Uncollected
	Current receivables, net	/	Net sales	x	365	=	Days' sales uncollected
Barco	$35400	/	$770,000	x	365	=	16.8	days
Kyan	$57400	/	$879,200	x	365	=	23.8	days