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The Following Summaries from the Income Statements and Balance Sheets

question 230

Essay

The following summaries from the income statements and balance sheets of Kouris Company and Brittania,Inc.are presented below.
(1)For both companies for 2018,compute the:
(a)Current ratio
(b)Acid-test ratio
(c)Accounts receivable turnover
(d)Inventory turnover
(e)Days' sales in inventory
(f)Days' sales uncollected
Which company do you consider to be the better short-term credit risk? Explain.
(2)For both companies for 2018,compute the:
(a)Profit margin ratio
(b)Return on total assets
(c)Return on common stockholders' equity
Which company do you consider to have better profitability ratios?
$The following summaries from the income statements and balance sheets of Kouris Company and Brittania,Inc.are presented below. (1)For both companies for 2018,compute the: (a)Current ratio (b)Acid-test ratio (c)Accounts receivable turnover (d)Inventory turnover (e)Days' sales in inventory (f)Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2)For both companies for 2018,compute the: (a)Profit margin ratio (b)Return on total assets (c)Return on common stockholders' equity Which company do you consider to have better profitability ratios? \begin{array}{c} \text { Kouris Company } \\ \text { Consolidated Statement of Income } \\ \text { May 31,2018 } \\ \text { (in millions) }\\ \begin{array} { | l | r | } \hline \text { Revenues } & \$ 10,697.0 \\ \hline \text { Cost of sales } & 6,313.6 \\ \hline \text { Gross profit } & 3,383.4 \\ \hline \text { Operating expenses } & 1,137.6 \\ \hline \text { Operating income } & 42.9 \\ \hline \text { Interest expense } & \underline { 79.9 } \\ \hline \text { Other revenues and expenses } & 1,123.0 \\ \hline \text { Income before tax } & \underline { 382.9 } \\ \hline \text { Income taxes } & 740.1 \\ \hline \text { Income before effect of accounting change } & \underline { 266.1 } \\ \hline \text { Cumulative effect of accounting change, net of tax } & 474.0 \\ \hline \text { Net income } & \$474.0\\ \hline \end{array}\end{array} \begin{array}{c} \text { Brittania, Inc. } \\ \text { Consolidated Statement of Income } \\ \text { January 3, 2018 } \\ \text { (in millions) }\\ \begin{array} { | l | r | } \hline \text { Revenues } & \$133.5 \\ \hline \text { Cost of sales } &87.3 \\ \hline \text { Gross profit } & 46.2\\ \hline \text { Operating expenses } & 37.3 \\ \hline \text { Operating income } & 8.9 \\ \hline \text { Interest expense } &(0.1 ) \\ \hline \text { Other revenues and expenses } & 0.3 \\ \hline \text { Income before tax } &9.1 \\ \hline \text { Income taxes } & 3.9\\ \hline \text { Net income } &\$ 5.2 \\ \hline \end{array}\end{array}$
$The following summaries from the income statements and balance sheets of Kouris Company and Brittania,Inc.are presented below. (1)For both companies for 2018,compute the: (a)Current ratio (b)Acid-test ratio (c)Accounts receivable turnover (d)Inventory turnover (e)Days' sales in inventory (f)Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2)For both companies for 2018,compute the: (a)Profit margin ratio (b)Return on total assets (c)Return on common stockholders' equity Which company do you consider to have better profitability ratios? \begin{array}{c} \text { Kouris Company } \\ \text { Consolidated Statement of Income } \\ \text { May 31,2018 } \\ \text { (in millions) }\\ \begin{array} { | l | r | } \hline \text { Revenues } & \$ 10,697.0 \\ \hline \text { Cost of sales } & 6,313.6 \\ \hline \text { Gross profit } & 3,383.4 \\ \hline \text { Operating expenses } & 1,137.6 \\ \hline \text { Operating income } & 42.9 \\ \hline \text { Interest expense } & \underline { 79.9 } \\ \hline \text { Other revenues and expenses } & 1,123.0 \\ \hline \text { Income before tax } & \underline { 382.9 } \\ \hline \text { Income taxes } & 740.1 \\ \hline \text { Income before effect of accounting change } & \underline { 266.1 } \\ \hline \text { Cumulative effect of accounting change, net of tax } & 474.0 \\ \hline \text { Net income } & \$474.0\\ \hline \end{array}\end{array} \begin{array}{c} \text { Brittania, Inc. } \\ \text { Consolidated Statement of Income } \\ \text { January 3, 2018 } \\ \text { (in millions) }\\ \begin{array} { | l | r | } \hline \text { Revenues } & \$133.5 \\ \hline \text { Cost of sales } &87.3 \\ \hline \text { Gross profit } & 46.2\\ \hline \text { Operating expenses } & 37.3 \\ \hline \text { Operating income } & 8.9 \\ \hline \text { Interest expense } &(0.1 ) \\ \hline \text { Other revenues and expenses } & 0.3 \\ \hline \text { Income before tax } &9.1 \\ \hline \text { Income taxes } & 3.9\\ \hline \text { Net income } &\$ 5.2 \\ \hline \end{array}\end{array}$
$\begin{array}{c}\text { Kouris Company } \\\text { Consolidated Statement of Income } \\\text { May 31,2018 } \\\text { (in millions) }\\\begin{array} { | l | r | } \hline \text { Revenues } & \$ 10,697.0 \\\hline \text { Cost of sales } & 6,313.6 \\\hline \text { Gross profit } & 3,383.4 \\\hline \text { Operating expenses } & 1,137.6 \\\hline \text { Operating income } & 42.9 \\\hline \text { Interest expense } & \underline { 79.9 } \\\hline \text { Other revenues and expenses } & 1,123.0 \\\hline \text { Income before tax } & \underline { 382.9 } \\\hline \text { Income taxes } & 740.1 \\\hline \text { Income before effect of accounting change } & \underline { 266.1 } \\\hline \text { Cumulative effect of accounting change, net of tax } & 474.0 \\\hline \text { Net income } & \$474.0\\\hline\end{array}\end{array}$
$The following summaries from the income statements and balance sheets of Kouris Company and Brittania,Inc.are presented below. (1)For both companies for 2018,compute the: (a)Current ratio (b)Acid-test ratio (c)Accounts receivable turnover (d)Inventory turnover (e)Days' sales in inventory (f)Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2)For both companies for 2018,compute the: (a)Profit margin ratio (b)Return on total assets (c)Return on common stockholders' equity Which company do you consider to have better profitability ratios? \begin{array}{c} \text { Kouris Company } \\ \text { Consolidated Statement of Income } \\ \text { May 31,2018 } \\ \text { (in millions) }\\ \begin{array} { | l | r | } \hline \text { Revenues } & \$ 10,697.0 \\ \hline \text { Cost of sales } & 6,313.6 \\ \hline \text { Gross profit } & 3,383.4 \\ \hline \text { Operating expenses } & 1,137.6 \\ \hline \text { Operating income } & 42.9 \\ \hline \text { Interest expense } & \underline { 79.9 } \\ \hline \text { Other revenues and expenses } & 1,123.0 \\ \hline \text { Income before tax } & \underline { 382.9 } \\ \hline \text { Income taxes } & 740.1 \\ \hline \text { Income before effect of accounting change } & \underline { 266.1 } \\ \hline \text { Cumulative effect of accounting change, net of tax } & 474.0 \\ \hline \text { Net income } & \$474.0\\ \hline \end{array}\end{array} \begin{array}{c} \text { Brittania, Inc. } \\ \text { Consolidated Statement of Income } \\ \text { January 3, 2018 } \\ \text { (in millions) }\\ \begin{array} { | l | r | } \hline \text { Revenues } & \$133.5 \\ \hline \text { Cost of sales } &87.3 \\ \hline \text { Gross profit } & 46.2\\ \hline \text { Operating expenses } & 37.3 \\ \hline \text { Operating income } & 8.9 \\ \hline \text { Interest expense } &(0.1 ) \\ \hline \text { Other revenues and expenses } & 0.3 \\ \hline \text { Income before tax } &9.1 \\ \hline \text { Income taxes } & 3.9\\ \hline \text { Net income } &\$ 5.2 \\ \hline \end{array}\end{array}$
$\begin{array}{c}\text { Brittania, Inc. } \\\text { Consolidated Statement of Income } \\\text { January 3, 2018 } \\\text { (in millions) }\\\begin{array} { | l | r | } \hline \text { Revenues } & \$133.5 \\\hline \text { Cost of sales } &87.3 \\\hline \text { Gross profit } & 46.2\\\hline \text { Operating expenses } & 37.3 \\\hline \text { Operating income } & 8.9 \\\hline \text { Interest expense } &(0.1 ) \\\hline \text { Other revenues and expenses } & 0.3 \\\hline \text { Income before tax } &9.1 \\\hline \text { Income taxes } & 3.9\\\hline \text { Net income } &\$ 5.2 \\\hline\end{array}\end{array}$

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