Question

Summary information from the financial statements of two companies competing in the same industry follows. Barco Kyan Company Company Data from the current year-end balance sheets Assets Cash $ 22.500 $35,000 Accounts receivable, net 35,400 57.400 Merchandise inventory 84,840 128.500 Prepaid expenses 5,800 7.200 Plant assets, net 320,000 309,400 Total assets $468,540 $537,500 Bareo Kyan Company Company Data from the current years income statement Sales $770,000 $879,200 Coat of goods sold 587,100 2,500 Interest expense 8.400 10.000 Income tax expense 14.800 24,272 Net income 159.700 212,428 Basic earnings per share 3.99 4.50 cash dividends per share 3.77 4.01 Liabilities and Equity Current liabilities Longter notes payable Common stock, 35 par value Retained earnings Total liabilities and equity Beginning-of-year balance sheet data $67.34096,300 Accounts receivable, net 78.800 117.000 Merchandise inventory 200.000 236,000 Total assets 122.400 38,200 common stock, 55 par value 3468,540 5537,500 Retained earnings $ 27,800 63,600 388,000 200,000 113,500 $ 58,200 111.400 2,500 236,000 5,044

Answer 1

Company / Choose Numerator Net Income 159700 212428 Profit Margin Ratio Choose Denominator Net Sales 770000 879200 = Profit Margin Ratio Profit Margin Ratio 20.74% 24.16% Barco Kyan Company / Total Asset Turnover Choose Denominator Average Total Assets 428270 480000 Choose Numerator Net Sales 770000 879200 = = Total Asset Turnover Total Asset Turnover 1.80 1.83 Barco Kyan Times Times Company / / Return on Total Assets Choose Denominator Average Total Assets 428270 480000 Choose Numerator Net Income 159700 212428 = = Return on Total Assets Return on Total Assets 37.29% 44.26% Barco Kyan Company Choose Numerator Net Income 159700 212428 Return on Common Stockholder's Equity / Choose Denominator = Return on Common Stockholder's Equity / Avg. Common Stockholder's Equity = Return on Common Stockholder's Equity 317950 50.23% 312622 67.95% Barco Kyan Company Choose Numerator Share Price 75 / 1. Price-Earning Ratio Choose Denominator Earning Per Share 3.99 4.50 = = Price-Earning Ratio Price-Earning Ratio 18.80 16.67 Barco Kyan Times Times Company / Choose Numerator Dividend Per Share 3.77 4.01 Dividend Yield Choose Denominator Share Price 75 75 Dividend Yield Dividend Yield 5.03% 5.35% Barco Kyan Kyan Company Stock is comparatively better investment, as we can see that almost all ratios are better than Barco company. Working Average Total Assets = (Beginning bal + Ending Bal) / 2 Barco (468540+388000)/2 Kyan (537500+422500)/2 Average Common stock = (Beginning bal + Ending Bal) / 2 Barco (322400+313500)/2 Kyan (324200+301044)/2 Common Stock Equity = Common stock + Retained Earning Barco Beginning 200000 + 113500 = 313500 Ending 200000 + 122400 = 322400 Kyan Beginning 236000 + 65044 = 301044 Ending 236000 +88200 = 324200