Summary information from the financial statements of two com

Summary information from the financial statements of two companies competing in the same industry follows Kyan Kyan Barco Company Company Barco Company Company Data from the current year-end balance sheets Data from the current year\'s income statement $ 880,200 770,000 $ 585,100 7,900 Assets Sales 632,500 Cash Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses Plant assets, net $ 19,500 34,000 Cost of goods sold 37,400 9,100 84,440 5,000 13,000 14,800 24,300 162,200 210,400 5.11 57,400 Interest expense 7,200 Income tax expense 132,500 Net income 6,950Basic earnings per share 4.51 304,400 290,000 Cash dividends per share 3.81 3.93 445,440 $ $ 542,450 lotal assets Liabilities and Equity Current liabilities Long-term notes payable Beginning-of-year balance sheet data Accounts receivable, net Current notes receivable (trade) $ 29,800 54,200 0 $ 61,340 $ 93,300 80,800 180,000 123,300 142,150 Common stock, $5 par value 0 55,600 398,000 101,000 Merchandise inventory 206,000 107,400 382,500 Common stock, $5 par value Total assets 206,000 Retained earnings 180,000 542,450 Retained earnings Total liabilities and equity $445,440 $ 98,300 93,600

Solution

1 Current ratio = Current assets / current liabilities Current assets = Cash + accounts receivable + Current notes receivable + merchandise inventory + prepaid expense Barco Kyan Current assets 155440 238050 Current liabilities 61340 93300 Current ratio 2.5 2.6 2 Acid test ratio = Acid test assets / current liabilities Acid test assets = current assets - prepaid expense - merchandise inventory Barco Kyan Liquid assets 66000 98600 Current liabilities 61340 93300 Acid test ratio 1.1 1.1 3 Accounts receivable turnover = net credit sales / average accounts receivable Average accounts receivable = beginning receivable + ending receivable / 2 Receivable includes accounts receivable + current notes receivables Barco Kyan Net sales 770000 880200 Beginning receivable 29800 54200 Ending receivable 46500 64600 Average Receivable 38150 59400 Accounts receivable turnover 20.2 14.8 4 Inventory turnover = Net sales / average inventory             Average inventory = Beginning inventory + ending inventory / 2 Barco Kyan Cost of goods sold 585100 632500 Beginning inventory 55600 107400 Ending inventory 84440 132500 Average merchandise inventory 70020 119950 Inventory turnover 8.4 5.3 5 Days sale in inventory = 365 / inventory turnover Barco Kyan Total days 365 365 Inventory turnover 8.4 5.3 Days sales in inventory 44 69 Days 6 Day\'s sale uncollected = Accounts receivable *365/ net sales Barco Kyan Total days 365 365 Accounts receivable turnover 20.2 14.8 Day\'s sale uncollected 18 25 Days