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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	$ 810,000	$ 902,200
Cash	$ 20,000	$ 36,000	Cost of goods sold	590,100	644,500
Accounts receivable, net	35,400	50,400	Interest expense	9,000	14,000
Merchandise inventory	84,440	130,500	Income tax expense	15,569	24,907
Prepaid expenses	6,000	7,200	Net income	195,331	218,793
Plant assets, net	320,000	305,400	Basic earnings per share	4.44	5.06
Total assets	$ 465,840	$ 529,500	Cash dividends per share	3.74	3.96
Liabilities and Equity			Beginning-of-year balance sheet data
Current liabilities	$ 67,340	$ 92,300	Accounts receivable, net	$ 27,800	$ 50,200
Long-term notes payable	78,800	117,000	Merchandise inventory	59,600	111,400
Common stock, $5 par value	220,000	216,000	Total assets	398,000	392,500
Retained earnings	99,700	104,200	Common stock, $5 par value	220,000	216,000
Total liabilities and equity	$ 465,840	$ 529,500	Retained earnings	68,929	56,479

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 companys stock can be purchased at $100 per share, compute their (e) price-earnings ratios and (f) dividend yields. 2b. Identify which companys stock you would recommend as the better investment.

(a) Company Profit Margin Ratio Denominator: Numerator: / II = Profit margin ratio Profit margin ratio % Barco / II Kyan / II = % Total Asset Turnover (b) Company Numerator: 1 Denominator: II Total Asset Turnover Total asset turnover 1 = Barco / = times Kyan / = times (c) Return on Total Assets Company Numerator: 1 Denominator: = Return on Total Assets II = Return on total assets Barco II % Kyan % Return On Equity (d) Company Numerator: Denominator II Return On Equity / II = Return On equity Barco / = % Kyan % Price-Earnings Ratio (e) Company Numerator: Denominator: = Price-Earnings Ratio Price-earnings ratio 1 II Barco / = times Kyan 1 II = times Dividend Yield (f) Company Numerator: Denominator: II Dividend Yield / II Dividend yield Barco / - % Kyan 1 II %

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