0 5 Required The foowing information applies to the question

0 5 Required The foowing information applies to the questions displayed below Summary information from the financial statements of two companies competing in the same industry follows Conpany Conpany Company Company 790,000 5895,200 89,100 646 1500 7,900 10,000 15,185241714 77,815 213,986 Sales ponts s 21,000 32,000 Cost of goods sold Accounts receivable, net 35,400 54,400Interest expense 9,400 8,800 Income tax expense 84,540 138,500 et income Basic earnings per share 5,60 7, 5405,94 555.15 s 61,340 5100,300 Current notes receivable (trade Prepald expenses Plant assets, met Total assets 4.68 3.74 Cash dividends per share 3.93 Beginning-of-year balance sheet data Liabilities and Equity s 26,800 s 561280 79,800 99,000 erchandise inventory 198,000 196,000 Total assets 164 800 154 850 Common stock,$s par value 495,940 5550,150 Retained earnings 61,600 109 1400 428,000 412,500 198,888 1960 129,105 94,92 Retained e 2a. For both companies compute the (a) profit margin ratio. (o) total asset turnover,(d return on total assets, and (o) return on gommon

Solution

Ratio

Formula & figures

Barco

Formula & figures

Kyan

Profit margin ratio = net income/sales

177815/790000

22.51%

213986/895200

23.90%

It is better for KYAN

total asset turnover = total sales/total assets

790000/495940

1.59

895200/550150

1.63

It is better for KYAN

return on total assets = net income/total assets

177815/495950

35.85%

213986/550150

38.90%

It is better for KYAN

return on common stock holder equity = net income/total equity

177815/354800

50.12%

213986/350850

60.99%

It is better for KYAN

price earning ratio = market price/eps

90/4.68

19.23

90/5.46

16.48

it is better for Barco

Dividend Yield = dividend paid/market price

3.74/75

4.99%

3.93/75

5.24%

it is better for kyan

On the basis of the above ratios we can say that KYAN is a better option for investment

Ratio	Formula & figures	Barco	Formula & figures	Kyan
Profit margin ratio = net income/sales	177815/790000	22.51%	213986/895200	23.90%	It is better for KYAN
total asset turnover = total sales/total assets	790000/495940	1.59	895200/550150	1.63	It is better for KYAN
return on total assets = net income/total assets	177815/495950	35.85%	213986/550150	38.90%	It is better for KYAN
return on common stock holder equity = net income/total equity	177815/354800	50.12%	213986/350850	60.99%	It is better for KYAN
price earning ratio = market price/eps	90/4.68	19.23	90/5.46	16.48	it is better for Barco
Dividend Yield = dividend paid/market price	3.74/75	4.99%	3.93/75	5.24%	it is better for kyan
On the basis of the above ratios we can say that KYAN is a better option for investment