Barry Computer Company Balance Sheet as of December 31, 2018 (In Thousands) Cash $96,560 Accounts payable $132,770 Receivables 434,520 Other current liabilities 168,980 Inventories 350,030 Notes payable to bank 60,350 Total current assets $881,110 Total current liabilities $362,100 Long term debt $350,030 Net fixed assets 325,890 Common equity (49,487 shares) 494,870 Total assets $1,207,000 Total liabilities and equity $1,207,000 Barry Computer Company Income Statement for Year Ended December 31, 2018 (In Thousands) Sales $1,700,000 Cost of goods sold Materials $731,000 Labor 459,000 Heat, light, and power 68,000 Indirect labor 170,000 Depreciation 34,000 1,462,000 Gross profit $ 238,000 Selling expenses 85,000 General and administrative expenses $ 51,000 Earnings before interest and taxes (EBIT) $ 102,000 Interest expense 31,503 Earnings before taxes (EBT) $ 70,497 Federal and state income taxes (40 ) 28,199 Net income $ 42,298 Earnings per share $ 0 85473 Price per share on December 31, 2018 $ 10 00 Calculate the indicated ratios for Barry Round your answers to two decimal places Ratio Barry Industry Average Current x 2 39x Quick x 1 44x Days sales outstanding a days 44 43 days Inventory turnover x 5 00x Total assets turnover x 1 64x Profit margin 2 37 ROA 3 89 ROE 9 09 ROIC 7 60 TIE x 3 27x Debt Total capital 44 23 M B 5 00 P E 14 39 EV EBITDA 8 11 a Calculation is based on a 365 day year Construct the DuPont equation for both Barry and the industry Round your answers to two decimal places FIRM INDUSTRY Profit margin 2 37 Total assets turnover x 1 64x Equity multiplier x x Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis Select IIIIIIIVVItem 19 The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry net income should be higher given the amount of equity, assets, and invested capital Finally, it's market value ratios are also below industry averages However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should loosen credit or apply a less stringent collection policy The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry net income should be higher given the amount of equity, assets, and invested capital However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry The firm's days sales outstanding ratio is less than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both While the company's profit margin is lower than the industry average, its other profitability ratios are high compared to the industry net income should be higher given the amount of equity, assets, and invested capital However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry The firm's days sales outstanding ratio is more than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy The total assets turnover ratio is well above the industry average so sales should be increased, assets increased, or both While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry net income should be higher given the amount of equity, assets, and invested capital However, the company seems to be in an above average liquidity position and financial leverage is similar to others in the industry The firm's days sales outstanding ratio is comparable to the industry average, indicating that the firm should neither tighten credit nor enforce a more stringent collection policy The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry net income should be higher given the amount of equity, assets, and invested capital However, the company seems to be in a below average liquidity position and financial leverage is similar to others in the industry Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2018 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 ) Select IIIIIIIVVItem 20 If 2018 represents a period of normal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning Potential investors who look only at 2018 ratios will be misled, and a return to supernormal conditions in 2019 could hurt the firm's stock price If 2018 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have substantial meaning Potential investors who look only at 2018 ratios will be well informed, and a return to normal conditions in 2019 could hurt the firm's stock price If 2018 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning Potential investors who look only at 2018 ratios will be misled, and a return to normal conditions in 2019 could hurt the firm's stock price If 2018 represents a period of supernormal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning Potential investors need only look at 2018 ratios to be well informed, and a return to normal conditions in 2019 could help the firm's stock price If 2018 represents a period of normal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning Potential investors who look only at 2018 ratios will be misled, and a continuation of normal conditions in 2019 could hurt the firm's stock price

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Barry Computer Company: Balance Sheet as of December 31, 2018 (In Thousands) Cash $96,560 Accounts payable $132,770 Receivables 434,520 Other current liabilities 168,980 Inventories 350,030

Barry Computer Company:
Balance Sheet as of December 31, 2018 (In Thousands)

Cash	$96,560	Accounts payable	$132,770
Receivables	434,520	Other current liabilities	168,980
Inventories	350,030	Notes payable to bank	60,350
Total current assets	$881,110	Total current liabilities	$362,100
		Long-term debt	$350,030
Net fixed assets	325,890	Common equity (49,487 shares)	494,870
Total assets	$1,207,000	Total liabilities and equity	$1,207,000

Barry Computer Company: Income Statement for Year Ended December 31, 2018 (In Thousands)

Sales		$1,700,000
Cost of goods sold
Materials	$731,000
Labor	459,000
Heat, light, and power	68,000
Indirect labor	170,000
Depreciation	34,000	1,462,000

Gross profit	$	238,000
Selling expenses		85,000
General and administrative expenses	$	51,000
Earnings before interest and taxes (EBIT)	$	102,000
Interest expense		31,503
Earnings before taxes (EBT)	$	70,497
Federal and state income taxes (40%)		28,199
Net income	$	42,298
Earnings per share	$	0.85473
Price per share on December 31, 2018	$	10.00

Calculate the indicated ratios for Barry. Round your answers to two decimal places.

Ratio	Barry	Industry Average
Current	x	2.39x
Quick	x	1.44x
Days sales outstanding^a	days	44.43 days
Inventory turnover	x	5.00x
Total assets turnover	x	1.64x
Profit margin	%	2.37%
ROA	%	3.89%
ROE	%	9.09%
ROIC	%	7.60%
TIE	x	3.27x
Debt/Total capital	%	44.23%
M/B	%	5.00%
P/E	%	14.39%
EV/EBITDA	%	8.11%

^aCalculation is based on a 365-day year.

Construct the DuPont equation for both Barry and the industry. Round your answers to two decimal places.

FIRM INDUSTRY

Profit margin % 2.37%

Total assets turnover x 1.64x

Equity multiplier x x
Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis. -Select-IIIIIIIVVItem 19
1. The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. Finally, it's market value ratios are also below industry averages. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry.
2. The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should loosen credit or apply a less stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry.
3. The firm's days sales outstanding ratio is less than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit margin is lower than the industry average, its other profitability ratios are high compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry.
4. The firm's days sales outstanding ratio is more than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well above the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in an above average liquidity position and financial leverage is similar to others in the industry.
5. The firm's days sales outstanding ratio is comparable to the industry average, indicating that the firm should neither tighten credit nor enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in a below average liquidity position and financial leverage is similar to others in the industry.
Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2018. 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.) -Select-IIIIIIIVVItem 20
1. If 2018 represents a period of normal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors who look only at 2018 ratios will be misled, and a return to supernormal conditions in 2019 could hurt the firm's stock price.
2. If 2018 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have substantial meaning. Potential investors who look only at 2018 ratios will be well informed, and a return to normal conditions in 2019 could hurt the firm's stock price.
3. If 2018 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2018 ratios will be misled, and a return to normal conditions in 2019 could hurt the firm's stock price.
4. If 2018 represents a period of supernormal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors need only look at 2018 ratios to be well informed, and a return to normal conditions in 2019 could help the firm's stock price.
5. If 2018 represents a period of normal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2018 ratios will be misled, and a continuation of normal conditions in 2019 could hurt the firm's stock price.