Summary information from the financial statements of two companies competing in the same industry follows.
Barco Kyan Barco Kyan
Company CompanyCompanyCompany
Data from the current year-end balance sheets Data from the current year’s income statement Assets Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(770,000 \)880,200
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 19,500 \) 34,000 Cost of goods sold . . . . . . . . . . . . . . . . . . 585,100 632,500
Accounts receivable, net . . . . . . . . . . . . . 37,400 57,400 Interest expense . . . . . . . . . . . . . . . . . . . . 7,900 13,000
Current notes receivable (trade) . . . . . . . 9,100 7,200 Income tax expense . . . . . . . . . . . . . . . . . 14,800 24,300
Merchandise inventory . . . . . . . . . . . . . . . 84,440 132,500 Net income . . . . . . . . . . . . . . . . . . . . . . . . 162,200 210,400
Prepaid expenses . . . . . . . . . . . . . . . . . . . 5,000 6,950 Basic earnings per share . . . . . . . . . . . . . 4.51 5.11
Plant assets, net . . . . . . . . . . . . . . . . . . . . 290,000 304,400 Cash dividends per share . . . . . . . . . . . . . 3.81 3.93
Total assets . . . . . . . . . . . . . . . . . . . . . . . . \(445,440 \)542,450
Beginning-of-year balance sheet data
Liabilities and Equity Accounts receivable, net . . . . . . . . . . . . . \( 29,800 \) 54,200
Current liabilities . . . . . . . . . . . . . . . . . . . . \( 61,340 \) 93,300 Current notes receivable (trade) . . . . . . . 0 0
Long-term notes payable . . . . . . . . . . . . . 80,800 101,000 Merchandise inventory . . . . . . . . . . . . . . . 55,600 107,400
Common stock, \(5 par value . . . . . . . . . . 180,000 206,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . 398,000 382,500
Retained earnings . . . . . . . . . . . . . . . . . . 123,300 142,150 Common stock, \)5 par value.......... 180,000 206,000
Total liabilities and equity . . . . . . . . . . . . . \(445,440 \)542,450 Retained earnings . . . . . . . . . . . . . . . . . . . 98,300 93,600
Required
1. For both companies compute the
(a) current ratio,
(b) acid-test ratio,
(c) accounts (including notes) receivable turnover,
(d) inventory turnover,
(e) days’ sales in inventory, and
(f) days’ sales uncollected.
Identify the company you consider to be the better short-term credit risk and explain why. Round to one decimal place.
