The following summaries from the income statements and balance sheets of Kouris

Question

The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below.
(1) For both companies for 2016, 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 2016, 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?

Kouris Company Consolidated Balance Sheets (in millions)
	May 31
	2016	2015
Assets
Current assets:
Cash and cash equivalents	$ 634.0	$575.5
Accounts receivable, net of allowance	2,101.1	1,804.1
Inventories	1,514.9	1,373.8
Other current assets	429.9	401.3
Total current assets	4,679.9	4,154.7
Property, plant, and equipment, net	1,620.8	1,614.5
Other long term assets	413.2	670.8
Total assets	$6,713.9	$6,440.0

Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt	$ 205.7	$ 55.3
Notes payable	75.4	425.2
Accounts payable	572.7	504.4
Accrued liabilities	1,054.2	765.3
Income taxes payable	107.2	83.0
Total current liabilities	2,015.2	1,833.2
Long term liabilities	708.0	767.8
Total liabilities	2,723.2	2,601.0
Stockholders' equity:
Common stock	2.8	2.8
Contributed capital in excess of par value	589.0	538.7
Unearned stock compensation	(0.6)	(5.1)
Accumulated other comprehensive loss	(239.7)	(192.4)
Retained earnings	3,639.2	3,495.0
Total stockholders' equity	3,990.7	3,839.0
Total liabilities and stockholders' equity	$6,713.9	$6,440.0

Kouris Company Consolidated Statement of Income May 31, 2016 (in millions)
Revenues	$10,697.0
Cost of sales	6,313.6
Gross profit	4,383.4
Operating expenses	3,137.6
Operating income	1,245.8
Interest expense	42.9
Other revenues and expenses	79.9
Income before tax	1,123.0
Income taxes	382.9
Income before effect of accounting change	740.1
Cumulative effect of accounting change, net of tax	266.1
Net income	$ 474.0

Brittania, Inc. Consolidated Balance Sheets
	Jan. 3,	Jan. 4,
	2016	2015
Assets
Current assets:
Cash and cash equivalents	$34.5	$22.2
Accounts receivable, net of allowance	15.5	14.7
Inventories	27.2	28.4
Other current assets	3.5	4.2
Total current assets	80.7	69.5
Property, plant, and equipment, net	5.7	7.0
Other long term assets	1.1	1.5
Total assets	$87.5	$78.0

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 8.5	$ 6.6
Accrued liabilities	7.8	5.6
Total current liabilities	16.3	12.2
Long term liabilities	2.5	2.6
Total liabilities	18.8	14.8
Stockholders' equity:
Common stock	2.3	2.3
Contributed capital in excess of par value	17.8	17.4
Unearned stock compensation	(0.1)	(0.5)
Accumulated other comprehensive loss	(0.9)	(1.3)
Treasury stock	(6.3)	(5.4)
Retained earnings	55.9	50.7
Total stockholders' equity	68.7	63.2
Total liabilities and stockholders' equity	$87.5	$78.0

Brittania, Inc. Consolidated Statement of Income January 3, 2016 (in millions)
Revenues	$133.5
Cost of sales	87.3
Gross profit	46.2
Operating expenses	37.3
Operating income	8.9
Interest expense	(0.1)
Other revenues and expenses	0.3
Income before tax	9.1
Income taxes	3.9
Net income	$ 5.2

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