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Summary information from the financial statements of two companies competing in the same industry follows. Kyan Company 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 Total liabilities and equity Barco Company $ 19,000 36,400 84,640 5,700 360,000 $ 505,740 $ 33,000 57,400 130,500 7,450 307,400 $ 535,750 $ 100,300 $ 61,340 81,800 220,000 142,600 101,000 206,000 128,450 $ 505,740 $ 535,750 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 $ 760,000 586,100 7,700 14,608 151,592 3.45 3.79 $ 25,800 55,600 448,000 220,000 157,768 Kyan Company $ 909,200 648,500 19,000 25,100 216,600 5.26 3.95 $ 58,200 113,400 412,500 206,000 74,590 2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on equity.

Summary information from the financial statements of two companies competing in the same industry follows. Kyan Company 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 Total liabilities and equity Barco Company $ 19,000 36,400 84,640 5,700 360,000 $ 505,740 $ 33,000 57,400 130,500 7,450 307,400 $ 535,750 $ 100,300 $ 61,340 81,800 220,000 142,600 101,000 206,000 128,450 $ 505,740 $ 535,750 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 $ 760,000 586,100 7,700 14,608 151,592 3.45 3.79 $ 25,800 55,600 448,000 220,000 157,768 Kyan Company $ 909,200 648,500 19,000 25,100 216,600 5.26 3.95 $ 58,200 113,400 412,500 206,000 74,590 2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on equity.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 4PB
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2A Prof Mar 2A Tot Asset 2A Ret on Tot 2A Ret On Ratio Turn Assets Equity For both companies compute the profit margin ratio. Profit Margin Ratio Denominator: (a) Company Barco Kyan Numerator: / I I 2A Price Earn Ratio = = = = 2A Div Yield Profit margin ratio Profit margin ratio % % Req 2B
Transcribed Image Text:2A Prof Mar 2A Tot Asset 2A Ret on Tot 2A Ret On Ratio Turn Assets Equity For both companies compute the profit margin ratio. Profit Margin Ratio Denominator: (a) Company Barco Kyan Numerator: / I I 2A Price Earn Ratio = = = = 2A Div Yield Profit margin ratio Profit margin ratio % % Req 2B
[The following information applies to the questions displayed below.] Summary information from the financial statements of two companies competing in the same industry follows. 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 Total liabilities and equity Barco Company $ 19,000 36,400 84,640 5,700 360,000 $ 505,740 Kyan Company $ 33,000 57,400 130,500 7,450 307,400 $ 535,750 $ 100,300 $ 61,340 81,800 220,000 142,600 101,000 206,000 128,450 $ 505,740 $ 535,750 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 datal Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value. Retained earnings Barco Company $760,000 586, 100 7,700 14,608 151,592 3.45 3.79 $ 25,800 55,600 448,000 220,000 157,768 Kyan Company $ 909,200 648,500 19,000 25,100 216,600 5.26 3.95 $ 58,200 113,400 412,500 206,000 74,590 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 $85 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.
Transcribed Image Text:[The following information applies to the questions displayed below.] Summary information from the financial statements of two companies competing in the same industry follows. 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 Total liabilities and equity Barco Company $ 19,000 36,400 84,640 5,700 360,000 $ 505,740 Kyan Company $ 33,000 57,400 130,500 7,450 307,400 $ 535,750 $ 100,300 $ 61,340 81,800 220,000 142,600 101,000 206,000 128,450 $ 505,740 $ 535,750 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 datal Accounts receivable, net Merchandise inventory Total assets Common stock, $5 par value. Retained earnings Barco Company $760,000 586, 100 7,700 14,608 151,592 3.45 3.79 $ 25,800 55,600 448,000 220,000 157,768 Kyan Company $ 909,200 648,500 19,000 25,100 216,600 5.26 3.95 $ 58,200 113,400 412,500 206,000 74,590 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 $85 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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