[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 years income statement Assets Sales $ 790,000 $ 881,200 Cash $ 20,500 $ 35,000 Cost of goods sold 592,100 642,500 Accounts receivable, net 36,400 59,400 Interest expense 7,500 10,000 Merchandise inventory 84,740 140,500 Income tax expense 15,185 24,327 Prepaid expenses 6,100 7,150 Net income 175,215 204,373 Plant assets, net 360,000 305,400 Basic earnings per share 5.48 5.21 Total assets $ 507,740 $ 547,450 Cash dividends per share 3.81 3.93 Liabilities and Equity Beginning-of-year balance sheet data Current liabilities $ 66,340 $ 93,300 Accounts receivable, net $ 26,800 $ 55,200 Long-term notes payable 83,800 115,000 Merchandise inventory 65,600 105,400 Common stock, $5 par value 160,000 196,000 Total assets 448,000 402,500 Retained earnings 197,600 143,150 Common stock, $5 par value 160,000 196,000 Total liabilities and equity $ 507,740 $ 547,450 Retained earnings 144,305 92,833 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 companys stock can be purchased at $90 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 companys stock you would recommend as the better investment.
