Problem 17-5A Comparative ratio analysis LO P3 Skip to question [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 Kyan Company Barco Company Kyan Company Data from the current year-end balance sheets Data from the current year’s income statement Assets Sales $ 770,000 $ 897,200 Cash $ 19,000 $ 30,000 Cost of goods sold 594,100 642,500 Accounts receivable, net 34,400 57,400 Interest expense 8,100 18,000 Merchandise inventory 84,740 140,500 Income tax expense 14,800 24,769 Prepaid expenses 5,900 7,150 Net income 153,000 211,931 Plant assets, net 310,000 305,400 Basic earnings per share 4.50 5.41 Total assets $ 454,040 $ 540,450 Cash dividends per share 3.82 3.93 Liabilities and Equity Beginning-of-year balance sheet data Current liabilities $ 67,340 $ 93,300 Accounts receivable, net $ 31,800 $ 56,200 Long-term notes payable 79,800 107,000 Merchandise inventory 57,600 115,400 Common stock, $5 par value 170,000 196,000 Total assets 438,000 362,500 Retained earnings 136,900 144,150 Common stock, $5 par value 170,000 196,000 Total liabilities and equity $ 454,040 $ 540,450 Retained earnings 113,780 86,275 rev: 11_27_2019_QC_CS-192168 Problem 17-5A Part 2 2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets,

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 17-5A Comparative ratio analysis LO P3

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[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	Kyan Company		Barco Company	Kyan Company
Data from the current year-end balance sheets		Data from the current year’s income statement
Assets						Sales	$	770,000	$	897,200
Cash	$	19,000	$	30,000		Cost of goods sold		594,100		642,500
Accounts receivable, net		34,400		57,400		Interest expense		8,100		18,000
Merchandise inventory		84,740		140,500		Income tax expense		14,800		24,769
Prepaid expenses		5,900		7,150		Net income		153,000		211,931
Plant assets, net		310,000		305,400		Basic earnings per share		4.50		5.41
Total assets	$	454,040	$	540,450		Cash dividends per share		3.82		3.93

Liabilities and Equity						Beginning-of-year balance sheet data
Current liabilities	$	67,340	$	93,300		Accounts receivable, net	$	31,800	$	56,200
Long-term notes payable		79,800		107,000		Merchandise inventory		57,600		115,400
Common stock, $5 par value		170,000		196,000		Total assets		438,000		362,500
Retained earnings		136,900		144,150		Common stock, $5 par value		170,000		196,000
Total liabilities and equity	$	454,040	$	540,450		Retained earnings		113,780		86,275

rev: 11_27_2019_QC_CS-192168

Problem 17-5A Part 2

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 $80 per share, compute their (e) price-earnings ratios and (f) 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.

Complete this question by entering your answers in the tabs below.

2A Prof Mar Ratio
2A Tot Asset Turn
2A Ret on Tot Assets
2A Ret On Com Stock
2A Price Earn Ratio
2A Div Yield
Req 2B

Assuming that each company’s stock can be purchased at $80 per share, compute their dividend yields.

(f)	Dividend Yield
Company	Choose Numerator:	/	Choose Denominator:	=	Dividend Yield
	Annual cash dividends per share	/	Market price per share	=	Dividend yield
Barco		/	80	=		%
Kyan		/	80	=		%

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