4-23 Ratio analysis Data for Barry Computer Co. and its industry averages follow. a Calculate the indicated ratios for Barry. b. Construct the extended Du Pont equation for both Barry and the industry. c. Outline Barry's strengths and weaknesses as revealed by your analysis. d. Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2005. How would that information affect the validity of your ratio analysis? (Hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.) $129,000 84,000 117,000 $330,000 256,500 361,000 $947,500 $1,607,500 Barry Computer Company: Balance Sheet as of December 31, 2005 (In Thousands) Cash $ 77,500 Accounts payable Receivables 336,000 Notes payable Inventories 241,500 Other current liabilities Total current assets $655,000 Total current liabilities Long-term debt Net fixed assets 292,500 Common equity Total assets $947,500 Total liabilities and equity Barry Computer Company: Income Statement for Year Ended December 31, 2005 (In Thousands) Sales Cost of goods sold Materials $717,000 Labor 453,000 Heat, light, and power 68,000 Indirect labor 113,000 Depreciation 41,500 Gross profit Selling expenses General and administrative expenses Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Federal and state income taxes (40 percent) Net income 1,392,500 $ 215,000 115,000 30,000 $ 70,000 24,500 45,500 18,200 27,300 Ratio Barry Industry Average Current Quick Days sales outstanding Inventory turnover Total assets turnover Net profit margin ROA ROE Total debt/total assets Calculation is based on a 365-day year. 20x 13x 35 days 6.7x 3.0x 1.2% 3.69 9.00 60.0%