FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Summary information from the financial statements of two companies competing in the same industry follows.
Barco
Company
Data from the current year-end
balance sheets
Assets
Cash
Accounts receivable, net
Merchandise inventory
Prepaid expenses
Plant assets, net
Total assets
Liabilities and Equity
Current liabilities
Long-term notes payable
Common stock, $5 par value
Retained earnings
Barco
Company
Kyan
Company
$ 19,000 $ 35,000
39,400 53,400
84,640 132,500
5,100
7,300
340,000 307,400
$ 488,140 $ 535,600
$ 71,340
$ 97,300
84,800
107,000
210,000
196,000
122,000
135,300
Total liabilities and equity $ 488,140 $ 535,600
Data from the current year's
income statement
Sales
Cost of goods sold
Interest expense
Income tax expense
Net income
Basic earnings per share
Cash dividends per share
Beginning-of-year balance sheet
data
Accounts receivable, net
Merchandise inventory
Total assets
Common stock, $5 par value
Retained earnings
Kyan
Company
$ 810,000 $ 905,200
590,100
630,500
8,000
15,569
196,331
4.67
3.77
14,000
24,990
235,710
6.01
3.96
$ 26,800
$ 52,200
107,400
61,600
398,000 392,500
196,000
210,000
84,009
54,822
2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on equity.
Assuming that each company's stock can be purchased at $70 per share, compute their (e) price-earnings ratios and (f) dividend
yields.
2b. Identify which company's stock you would recommend as the better investment.
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Transcribed Image Text:! Required information [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 Data from the current year-end balance sheets Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Barco Company Kyan Company $ 19,000 $ 35,000 39,400 53,400 84,640 132,500 5,100 7,300 340,000 307,400 $ 488,140 $ 535,600 $ 71,340 $ 97,300 84,800 107,000 210,000 196,000 122,000 135,300 Total liabilities and equity $ 488,140 $ 535,600 Data from the current year's income statement Sales Cost of goods sold Interest expense Income tax expense Net income Basic earnings per share Cash dividends per share Beginning-of-year balance sheet data Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value Retained earnings Kyan Company $ 810,000 $ 905,200 590,100 630,500 8,000 15,569 196,331 4.67 3.77 14,000 24,990 235,710 6.01 3.96 $ 26,800 $ 52,200 107,400 61,600 398,000 392,500 196,000 210,000 84,009 54,822 2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on equity. Assuming that each company's stock can be purchased at $70 per share, compute their (e) price-earnings ratios and (f) dividend yields. 2b. Identify which company's stock you would recommend as the better investment.
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