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Required information Problem 17-5A Comparative ratio analysis LO A1, P3 [The following information applies to the...

Required information

Problem 17-5A Comparative ratio analysis LO A1, 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
Data from the current year-end balance sheets Data from the current year’s income statement
Assets Sales $ 800,000 $ 912,200
Cash $ 18,000 $ 34,000 Cost of goods sold 596,100 650,500
Accounts receivable, net 37,400 56,400 Interest expense 7,700 17,000
Current notes receivable (trade) 9,500 7,400 Income tax expense 15,377 25,183
Merchandise inventory 84,540 138,500 Net income 180,823 219,517
Prepaid expenses 5,800 7,150 Basic earnings per share 5.32 4.46
Plant assets, net 350,000 304,400 Cash dividends per share 3.81 3.92
Total assets $ 505,240 $ 547,850
Beginning-of-year balance sheet data
Liabilities and Equity Accounts receivable, net $ 31,800 $ 53,200
Current liabilities $ 71,340 $ 93,300 Current notes receivable (trade) 0 0
Long-term notes payable 85,800 99,000 Merchandise inventory 63,600 117,400
Common stock, $5 par value 170,000 246,000 Total assets 428,000 412,500
Retained earnings 178,100 109,550 Common stock, $5 par value 170,000 246,000
Total liabilities and equity $ 505,240 $ 547,850 Retained earnings 126,817 82,897

Problem 17-5 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 share and each company’s stock can be purchased at $105 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.

For both companies compute the profit margin ratio.

(a) Profit Margin Ratio
Company Choose Numerator: / Choose Denominator: = Profit margin ratio
/ = Profit margin ratio
Barco / = 0 %
Kyan / = 0 %

For both companies compute the total asset turnover

(b) Total Asset Turnover
Company Choose Numerator: / Choose Denominator: = Total Asset Turnover
/ = Total asset turnover
Barco / = 0 times
Kyan / = 0 times

For both companies compute the return on total assets.

(c) Return on Total Assets
Company Choose Numerator: / Choose Denominator: = Return on Total Assets
/ = Return on total assets
Barco / = 0 %
Kyan / = 0 %

For both companies compute the return on common stockholders’ equity.

(d) Return On Common Stockholders' Equity
Company Choose Numerator: / Choose Denominator = Return On Common Stockholders' Equity
- / = Return On common stockholders' equity
Barco - / = 0 %
Kyan - / = 0 %

Assuming that share and each company’s stock can be purchased at $105 per share, compute their price-earnings ratios.

(e) Price-Earnings Ratio
Company Choose Numerator: / Choose Denominator: = Price-Earnings Ratio
/ = Price-earnings ratio
Barco / = 0 times
Kyan / = 0 times

Assuming that share and each company’s stock can be purchased at $75 per share, compute their dividend yields.

(f) Dividend Yield
Company Choose Numerator: / Choose Denominator: = Dividend Yield
/ = Dividend yield
Barco / = 0 %
Kyan / = 0 %

Identify which company’s stock you would recommend as the better investment.

The better investment

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