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, the number of shares is shown in thousands too. Barry Computer Company: Income Statement for Year Ended December 31, 2021 (in thousands) Sales $2,500,000 "Calculation is based on a 365 -day year. b. Construct the DuPont equatich for both Barry and the industry. Do not round intermediate calculations, Round your answers to two decimal places. c. Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis. I. The firm's days sales cutstanding 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 protit 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. II. 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 coliection 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 profitablity ratios are low cornpared 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 simalar to others in the industry. 111. 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. IV. The firm's days sales outstanding ratio is more than the industry average, indicating that the firm should tightericredie or enforce a more stringent collection policy. The total assets turnever ratio is well abeve the industry average, so sales should be increased, arsets increased, or both. While the company's profit margin is higher than the industry average, its other profiabingy ratios are low compared to the industry - net inceme 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 ieverage is similar to others in the industry. V. The firm's days sales outstanding ratio is comparable to the industry average, indieating 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 sules should be increased, assets increased, or both. While the compenys profit margin is higher than the industry average, iss other profitability ratios are low compared to the industry = net income should be higher given the amount of equity, assets, and invested capitai. However, the company seems to be in a below average liquidity positien and financial leverage is similar to others in the industry. d. Suppose Barry had doubled ing sales as well as its inventories, accounts receivable, and common equily during 2021. How would that information arfect the validity of your ratio analysis? (Hint: Think asout averages and the effects of rapid gremth on ratios if averages are not used. No calculations are needed.) L. If 2021 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and indusery averages will have letie meaning. Potential investors who look only at 2021 ratios will be mislod, and a return to normal conditions in 2022 covld hurt the firmis itnck price. If. If 2021 represents a period of supernormal growth for the firm, ratios based en this year will be accurate and a comparison between them and industry averages will have subsantial meaning. Potential investors need only look at 2021 ratios to be well informed, and a recurn to normal conditions in 2022 could help the firm's stock price III. If 2021 represents a period of normal growth for the firm, ratios bosed on this year will be distorted and a comparison betiveen them and induatry averages will have litte meaning. Potential investors who look oniy at 2021 ratos will be msied, and a continuoblion of normal condicions in 2022 could hurt the firm't stock prices IV. If 2021 represents a perisd of normal growth for the firm, ratios based en this year will be accurate and a coimparison between them and induatry averages will have substantid meening. Potential invectors who look only ot 20211 retios will be miled, and a return to supernermal constions in 2022 could Burt the Erum stock price. V. If zo21 represents a period of supeinormal growth for the firm, robios based on this year will be eistorted and a comparison between them and inctustry averages will have substantial meuning. Potential investors who look only at 2021 ratios wis be well informed, and a return to nomal conditions in 2022 cousd hurt the 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, the number of shares is shown in thousands too. Barry Computer Company: Income Statement for Year Ended December 31, 2021 (in thousands) Sales $2,500,000 "Calculation is based on a 365 -day year. b. Construct the DuPont equatich for both Barry and the industry. Do not round intermediate calculations, Round your answers to two decimal places. c. Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis. I. The firm's days sales cutstanding 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 protit 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. II. 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 coliection 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 profitablity ratios are low cornpared 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 simalar to others in the industry. 111. 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. IV. The firm's days sales outstanding ratio is more than the industry average, indicating that the firm should tightericredie or enforce a more stringent collection policy. The total assets turnever ratio is well abeve the industry average, so sales should be increased, arsets increased, or both. While the company's profit margin is higher than the industry average, its other profiabingy ratios are low compared to the industry - net inceme 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 ieverage is similar to others in the industry. V. The firm's days sales outstanding ratio is comparable to the industry average, indieating 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 sules should be increased, assets increased, or both. While the compenys profit margin is higher than the industry average, iss other profitability ratios are low compared to the industry = net income should be higher given the amount of equity, assets, and invested capitai. However, the company seems to be in a below average liquidity positien and financial leverage is similar to others in the industry. d. Suppose Barry had doubled ing sales as well as its inventories, accounts receivable, and common equily during 2021. How would that information arfect the validity of your ratio analysis? (Hint: Think asout averages and the effects of rapid gremth on ratios if averages are not used. No calculations are needed.) L. If 2021 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and indusery averages will have letie meaning. Potential investors who look only at 2021 ratios will be mislod, and a return to normal conditions in 2022 covld hurt the firmis itnck price. If. If 2021 represents a period of supernormal growth for the firm, ratios based en this year will be accurate and a comparison between them and industry averages will have subsantial meaning. Potential investors need only look at 2021 ratios to be well informed, and a recurn to normal conditions in 2022 could help the firm's stock price III. If 2021 represents a period of normal growth for the firm, ratios bosed on this year will be distorted and a comparison betiveen them and induatry averages will have litte meaning. Potential investors who look oniy at 2021 ratos will be msied, and a continuoblion of normal condicions in 2022 could hurt the firm't stock prices IV. If 2021 represents a perisd of normal growth for the firm, ratios based en this year will be accurate and a coimparison between them and induatry averages will have substantid meening. Potential invectors who look only ot 20211 retios will be miled, and a return to supernermal constions in 2022 could Burt the Erum stock price. V. If zo21 represents a period of supeinormal growth for the firm, robios based on this year will be eistorted and a comparison between them and inctustry averages will have substantial meuning. Potential investors who look only at 2021 ratios wis be well informed, and a return to nomal conditions in 2022 cousd hurt the
