Problem 13-5A (Algo) Comparative ratio analysis LO 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 Data from the current year-end balance sheets Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Current liabilities. Long-term notes payable. Common stock, $5 par value Retained earnings Total liabilities and equity Problem 13-5A (Algo) Part 1 Barco Company Kyan Company $ 33,000 56,400 132,500 $ 19,500 36,400 85,040 5,700 7,400 309,400 290,000 $ 436,640 $ 538,700 $ 70,340 $ 104,300 115,000 83,800 160,000 122,500 206,000 113,400 $ 436,640 $ 538,700 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 Beginning-of-year balance sheet. data Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings $ 780,000 $ 927,200 583,100 646,500 14,000 25,597 241,103 5.85 4.01 8,500 14,992 173,408 5.42 3.74 $ 28,800 59,600 Kyan Company 448,000 160,000 68,772 $ 52,200 107,400 412,500 206,000 37,509 Required: 1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) day sales in inventory, and (days' sales uncollected. Note: Do not round intermediate calculations. 1b. Identify the company you consider to be the better short-term credit risk.
Problem 13-5A (Algo) Comparative ratio analysis LO 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 Data from the current year-end balance sheets Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Current liabilities. Long-term notes payable. Common stock, $5 par value Retained earnings Total liabilities and equity Problem 13-5A (Algo) Part 1 Barco Company Kyan Company $ 33,000 56,400 132,500 $ 19,500 36,400 85,040 5,700 7,400 309,400 290,000 $ 436,640 $ 538,700 $ 70,340 $ 104,300 115,000 83,800 160,000 122,500 206,000 113,400 $ 436,640 $ 538,700 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 Beginning-of-year balance sheet. data Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings $ 780,000 $ 927,200 583,100 646,500 14,000 25,597 241,103 5.85 4.01 8,500 14,992 173,408 5.42 3.74 $ 28,800 59,600 Kyan Company 448,000 160,000 68,772 $ 52,200 107,400 412,500 206,000 37,509 Required: 1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) day sales in inventory, and (days' sales uncollected. Note: Do not round intermediate calculations. 1b. Identify the company you consider to be the better short-term credit risk.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 74E
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![Problem 13-5A (Algo) Comparative ratio analysis LO 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
Data from the current year-end
balance sheets
Assets
Cash
Accounts receivable, net
Merchandise inventory
Prepaid expenses
Plant assets, net
Total assets
Liabilities and Equity
Current liabilities
Long-term notes payable
Common stock, $5 par value
Retained earnings
Total liabilities and equity
Problem 13-5A (Algo) Part 1
Barco
Company
Kyan
Company
$ 19,500
36,400
85,040
5,700
$ 33,000
56,400
132,500
7,400
309,400
290,000
$ 436,640 $ 538,700
$ 70,340 $ 104,300
115,000
83,800
160,000
206,000
122,500
113,400
$ 436,640 $ 538,700
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
Beginning-of-year balance sheet
data
Accounts receivable, net
Merchandise inventory
Total assets
Common stock, $5 par value
Retained earnings
$ 780,000
583,100
8,500
14,992
173,408
5.42
3.74
Kyan
Company
$ 927,200
646,500
14,000
25,597
241,103
5.85
4.01
$ 28,800
59,600
!!
448,000
$ 52,200
107,400
412,500
206,000
37,509
160,000
68,772
Required:
1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) days'
sales in inventory, and (f) days' sales uncollected.
Note: Do not round intermediate calculations.
1b. Identify the company you consider to be the better short-term credit risk.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbdc9b21b-d71c-4cf6-b619-32e22bb50e87%2F74881a49-da72-42c7-a861-09683b10ebdf%2F6w6d6k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 13-5A (Algo) Comparative ratio analysis LO 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
Data from the current year-end
balance sheets
Assets
Cash
Accounts receivable, net
Merchandise inventory
Prepaid expenses
Plant assets, net
Total assets
Liabilities and Equity
Current liabilities
Long-term notes payable
Common stock, $5 par value
Retained earnings
Total liabilities and equity
Problem 13-5A (Algo) Part 1
Barco
Company
Kyan
Company
$ 19,500
36,400
85,040
5,700
$ 33,000
56,400
132,500
7,400
309,400
290,000
$ 436,640 $ 538,700
$ 70,340 $ 104,300
115,000
83,800
160,000
206,000
122,500
113,400
$ 436,640 $ 538,700
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
Beginning-of-year balance sheet
data
Accounts receivable, net
Merchandise inventory
Total assets
Common stock, $5 par value
Retained earnings
$ 780,000
583,100
8,500
14,992
173,408
5.42
3.74
Kyan
Company
$ 927,200
646,500
14,000
25,597
241,103
5.85
4.01
$ 28,800
59,600
!!
448,000
$ 52,200
107,400
412,500
206,000
37,509
160,000
68,772
Required:
1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts receivable turnover, (d) inventory turnover, (e) days'
sales in inventory, and (f) days' sales uncollected.
Note: Do not round intermediate calculations.
1b. Identify the company you consider to be the better short-term credit risk.
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Step 1: Meaning of ratio analysis
VIEWStep 2: Computation of current ratio and acid-test ratio
VIEWStep 3: Calculation of receivable turnover and inventory turnover
VIEWStep 4: Calculation of days' sales in inventory and days sales uncollected
VIEWStep 5: Determination of better short-term risk
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