Problem 13-5A Comparative ratio analysis LO P3
[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 |
Kyan Company |
Barco Company |
Kyan Company |
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Data from the current year-end balance sheets | Data from the current year’s income statement | |||||||||||||
Assets | Sales | $ | 770,000 | $ | 890,200 | |||||||||
Cash | $ | 19,500 | $ | 32,000 | Cost of goods sold | 590,100 | 642,500 | |||||||
Accounts receivable, net | 36,400 | 51,400 | Interest expense | 9,300 | 17,000 | |||||||||
Merchandise inventory | 84,840 | 134,500 | Income tax expense | 14,800 | 24,576 | |||||||||
Prepaid expenses | 5,300 | 7,450 | Net income | 155,800 | 206,124 | |||||||||
Plant assets, net | 320,000 | 309,400 | Basic earnings per share | 4.33 | 5.00 | |||||||||
Total assets | $ | 466,040 | $ | 534,750 | Cash dividends per share | 3.77 | 3.95 | |||||||
Liabilities and Equity | Beginning-of-year balance sheet data | |||||||||||||
Current liabilities | $ | 60,340 | $ | 92,300 | Accounts receivable, net | $ | 27,800 | $ | 58,200 | |||||
Long-term notes payable | 80,800 | 101,000 | Merchandise inventory | 55,600 | 109,400 | |||||||||
Common stock, $5 par value | 180,000 | 206,000 | Total assets | 458,000 | 412,500 | |||||||||
Retained earnings | 144,900 | 135,450 | Common stock, $5 par value | 180,000 | 206,000 | |||||||||
Total liabilities and equity | $ | 466,040 | $ | 534,750 | Retained earnings | 124,820 | 92,066 | |||||||
Problem 13-5A Part 2
2a. For both companies compute the (a)
profit margin ratio, (b) total asset turnover,
(c) return on total assets, and (d) return on
common stockholders’ equity. Assuming that each company’s stock can
be purchased at $75 per share, compute their (e)
price-earnings ratios and (f) dividend yields. (Do
not round intermediate calculations. Round your answers to 2
decimal places.)
2b. Identify which company’s stock you would
recommend as the better investment.
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