Data for Barry Computer Co and its industry averages follow The firm's debt is priced at par, so the market value of its debt equals its book value Since dollars are in thousands, number of shares are shown in thousands too Barry Computer Company Balance Sheet as of December 31, 2018 (In Thousands) Cash $137,280 Accounts payable $168,960 Receivables 348,480 Other current liabilities 137,280 Inventories 306,240 Notes payable to bank 105,600 Total current assets $792,000 Total current liabilities $411,840 Long term debt $306,240 Net fixed assets 264,000 Common equity (33,792 shares) 337,920 Total assets $1,056,000 Total liabilities and equity $1,056,000 Barry Computer Company Income Statement for Year Ended December 31, 2018 (In Thousands) Sales $1,600,000 Cost of goods sold Materials $736,000 Labor 464,000 Heat, light, and power 48,000 Indirect labor 96,000 Depreciation 32,000 1,376,000 Gross profit $ 224,000 Selling expenses 112,000 General and administrative expenses $ 32,000 Earnings before interest and taxes (EBIT) $ 80,000 Interest expense 33,686 Earnings before taxes (EBT) $ 46,314 Federal and state income taxes (40 ) 18,526 Net income $ 27,788 Earnings per share $ 0 82232 Price per share on December 31, 2018 $ 11 00 Calculate the indicated ratios for Barry Round your answers to two decimal places Ratio Barry Industry Average Current x 1 87x Quick x 1 13x Days sales outstanding a days 37 86 days Inventory turnover x 5 38x Total assets turnover x 1 77x Profit margin 1 65 ROA 2 92 ROE 8 75 ROIC 7 00 TIE x 2 28x Debt Total capital 56 43 M B 4 10 P E 16 28 EV EBITDA 8 73 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 1 65 Total assets turnover x 1 77x 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 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 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 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 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 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

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Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at par, so the market value of its debt equals

Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at par, so the market value of its debt equals its book value. Since dollars are in thousands, number of shares are shown in thousands too.

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

Cash	$137,280	Accounts payable	$168,960
Receivables	348,480	Other current liabilities	137,280
Inventories	306,240	Notes payable to bank	105,600
Total current assets	$792,000	Total current liabilities	$411,840
		Long-term debt	$306,240
Net fixed assets	264,000	Common equity (33,792 shares)	337,920
Total assets	$1,056,000	Total liabilities and equity	$1,056,000

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

Sales		$1,600,000
Cost of goods sold
Materials	$736,000
Labor	464,000
Heat, light, and power	48,000
Indirect labor	96,000
Depreciation	32,000	1,376,000

Gross profit	$	224,000
Selling expenses		112,000
General and administrative expenses	$	32,000
Earnings before interest and taxes (EBIT)	$	80,000
Interest expense		33,686
Earnings before taxes (EBT)	$	46,314
Federal and state income taxes (40%)		18,526
Net income	$	27,788
Earnings per share	$	0.82232
Price per share on December 31, 2018	$	11.00

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

Ratio	Barry	Industry Average
Current	x	1.87x
Quick	x	1.13x
Days sales outstanding^a	days	37.86 days
Inventory turnover	x	5.38x
Total assets turnover	x	1.77x
Profit margin	%	1.65%
ROA	%	2.92%
ROE	%	8.75%
ROIC	%	7.00%
TIE	x	2.28x
Debt/Total capital	%	56.43%
M/B	%	4.10%
P/E	%	16.28%
EV/EBITDA	%	8.73%

^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 % 1.65%

Total assets turnover x 1.77x

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 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.
2. 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.
3. 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.
4. 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.
5. 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.
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 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.
2. 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.
3. 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.
4. 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.
5. 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.