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Required information Problem 13-5A Comparative ratio analysis LO P3 [The following information applies to the questions...

Required information

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
Data from the current year-end balance sheets Data from the current year’s income statement
Assets Sales $ 780,000 $ 924,200
Cash $ 20,500 $ 31,000 Cost of goods sold 589,100 648,500
Accounts receivable, net 33,400 58,400 Interest expense 7,600 15,000
Merchandise inventory 84,840 138,500 Income tax expense 14,992 25,514
Prepaid expenses 6,000 7,550 Net income 168,308 235,186
Plant assets, net 330,000 313,400 Basic earnings per share 4.43 5.20
Total assets $ 474,740 $ 548,850 Cash dividends per share 3.81 4.01
Liabilities and Equity Beginning-of-year balance sheet data
Current liabilities $ 62,340 $ 96,300 Accounts receivable, net $ 31,800 $ 53,200
Long-term notes payable 83,800 115,000 Merchandise inventory 57,600 115,400
Common stock, $5 par value 190,000 226,000 Total assets 418,000 412,500
Retained earnings 138,600 111,550 Common stock, $5 par value 190,000 226,000
Total liabilities and equity $ 474,740 $ 548,850 Retained earnings 115,072 57,616

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 $80 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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