Summary information from the financial statements of two companies competing in the same industry follows. BarcoCompanyKyanCompany BarcoCompanyKyanCompanyData from the current year-end balance sheets Data from the current year’s income statementAssets Sales$800,000 $926,200 Cash$18,500 $31,000 Cost of goods sold 595,100 638,500 Accounts receivable, net 37,400 55,400 Interest expense 9,200 10,000 Merchandise inventory 84,740 136,500 Income tax expense 15,377 25,570 Prepaid expenses 6,000 7,700 Net income 180,323 252,130 Plant assets, net 350,000 307,400 Basic earnings per share 4.75 5.84 Total assets$496,640 $538,000 Cash dividends per share 3.81 3.98 Liabilities and Equity Beginning-of-year balance sheet data Current liabilities$62,340 $94,300 Accounts receivable, net$31,800 $53,200 Long-term notes payable 84,800 109,000 Merchandise inventory 61,600 111,400 Common stock, $5 par value 190,000 216,000 Total assets 388,000 412,500 Retained earnings 159,500 118,700 Common stock, $5 par value 190,000 216,000 Total liabilities and equity$496,640 $538,000 Retained earnings 123,957 38,506 rev: 11_27_2019_QC_CS-192168 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.

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Description: Summary information from the financial statements of two companies competing in the same industry follows. BarcoCompanyKyanCompany BarcoCompanyKyanCompanyData from the current year-end balance sheets Data from the current year’s income statementAss

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Managerial Accounting: The Cornerstone of Business Decision-Making

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ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...

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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	$	800,000	$	926,200
Cash	$	18,500	$	31,000		Cost of goods sold		595,100		638,500
Accounts receivable, net		37,400		55,400		Interest expense		9,200		10,000
Merchandise inventory		84,740		136,500		Income tax expense		15,377		25,570
Prepaid expenses		6,000		7,700		Net income		180,323		252,130
Plant assets, net		350,000		307,400		Basic earnings per share		4.75		5.84
Total assets	$	496,640	$	538,000		Cash dividends per share		3.81		3.98

Liabilities and Equity						Beginning-of-year balance sheet data
Current liabilities	$	62,340	$	94,300		Accounts receivable, net	$	31,800	$	53,200
Long-term notes payable		84,800		109,000		Merchandise inventory		61,600		111,400
Common stock, $5 par value		190,000		216,000		Total assets		388,000		412,500
Retained earnings		159,500		118,700		Common stock, $5 par value		190,000		216,000
Total liabilities and equity	$	496,640	$	538,000		Retained earnings		123,957		38,506

rev: 11_27_2019_QC_CS-192168

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.

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