Week12_ch13_solutions [Uploaded]

Week12_ch13_solutions [Uploaded] - FB2100 Accounting I...

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FB2100 – Accounting I – Semester A 2010 Solutions to Assigned Questions – Week 12 – Chapter 13 Problem 13-5A (60 minutes) Part 1 Barco Company Kyan Company a. Current ratio = 2.5 to 1 = 2.6 to 1 *$19,500 + $37,400 + $9,100 + $84,440 + $5,000 = $155,440 **$34,000 + $57,400 + $7,200 + $132,500 + $6,950 = $238,050 b. Acid-test ratio = 1.1 to 1 = 1.1 to 1 *$19,500 + $37,400 +$9,100 = $66,000 **$34,000 + $57,400 + $ 7,200 = $98,600 c. Accounts receivable turnover = 20.2 times = 14.8 times d. Inventory turnover = 8.4 times = 5.3 times e. Days’ sales in inventory x 365 = 52.7 days x 365 = 76.5 days f. Days' sales uncollected x 365 = 22.0 days x 365 = 26.8 days Short-term credit risk analysis: Barco and Kyan have essentially equal current ratios and equal acid-test ratios. However, Barco both turns its merchandise and collects its accounts receivable more rapidly than does Kyan. On this basis, Barco probably is the better short-term credit risk. $770,000 ($37,400 + $9,100 + $29,800)/2 $585,100 ($84,440 + $55,600)/2 $84,440 $585,100 $37,400 + $9,100 $770,000 $880,200 ($57,400 + $7,200 + $54,200)/2 $155,440* $61,340 $66,000* $61,340 $238,050** $93,300 $98,600** $93,300 $632,500 ($132,500 + $107,400)/2 $132,500 $632,500 $57,400 + $7,200 $880,200
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FB2100 – Accounting I – Semester A 2010 Solutions to Assigned Questions – Week 12 – Chapter 13 Problem 13-5A (Concluded) Part 2 Barco Company Kyan Company a. Profit margin ratio = 21.1% = 23.9% b. Total asset turnover = 1.8 times = 1.9 times c. Return on total assets = 38.5% = 45.5% d. Return on common stockholders' equity = 55.8% = 65.0% e. Price-earnings ratio = 16.6 = 14.7 f. Dividend yield = 5.1% = 5.1% Investment analysis: Kyan's profit margin ratio, total asset turnover, return on total assets, and return on common stockholders' equity are all higher than Barco’s. Although the companies pay the same dividend, Kyan's price- earnings ratio is lower. All of these factors suggest that Kyan's stock is likely
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This note was uploaded on 10/20/2011 for the course ACC fb200 taught by Professor Tony during the Spring '11 term at American University in Bulgaria.

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Week12_ch13_solutions [Uploaded] - FB2100 Accounting I...

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