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. (Do not round intermediate calculations.) 1b. Identify the company you consider to be the better short-term credit risk.
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. (Do not round intermediate calculations.) 1b. Identify the company you consider to be the better short-term credit risk.
Century 21 Accounting General Journal
11th Edition
ISBN:9781337680059
Author:Gilbertson
Publisher:Gilbertson
Chapter17: Financial Statement Analysis
Section17.4: Analyzing Financial Statements Using Financial Ratios
Problem 1WT
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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 | $ | 914,200 | |||||||||
Cash | $ | 21,000 | $ | 34,000 | Cost of goods sold | 587,100 | 642,500 | |||||||
Accounts receivable, net | 34,400 | 59,400 | Interest expense | 9,100 | 17,000 | |||||||||
Merchandise inventory | 84,940 | 132,500 | Income tax expense | 14,800 | 25,238 | |||||||||
Prepaid expenses | 5,400 | 7,350 | Net income | 159,000 | 229,462 | |||||||||
Plant assets, net | 310,000 | 307,400 | Basic earnings per share | 3.79 | 5.08 | |||||||||
Total assets | $ | 455,740 | $ | 540,650 | Cash dividends per share | 3.82 | 4.01 | |||||||
Liabilities and Equity | Beginning-of-year balance sheet data | |||||||||||||
Current liabilities | $ | 70,340 | $ | 102,300 | Accounts receivable, net | $ | 28,800 | $ | 56,200 | |||||
Long-term notes payable | 82,800 | 107,000 | Merchandise inventory | 63,600 | 115,400 | |||||||||
Common stock, $5 par value | 210,000 | 226,000 | Total assets | 388,000 | 382,500 | |||||||||
92,600 | 105,350 | Common stock, $5 par value | 210,000 | 226,000 | ||||||||||
Total liabilities and equity | $ | 455,740 | $ | 540,650 | Retained earnings | 94,040 | 57,140 | |||||||
rev: 11_27_2019_QC_CS-192168
Required:
1a. For both companies compute the (a)
1b. Identify the company you consider to be the better short-term credit risk.
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