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) ac Calculation is based on a 365 -day year. b. Construct the DuPont equation for both Barry and the industry. Do not round intermediate calculations, Round your answers to two decimal niacres. c. Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis: 1. The firm's days sales outstanding ratio is less than the industry averoge, 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 stiould be higher given the amount of equity, assets, and invested copital. However, the company seems to be in an average liquid ty position and financial leverage is similar to others in the industry. 11. The firm's days saies 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; of both. While the compaoy's profit margin is higher than the industry average, its other profitabilicy ratios are low compared to the industry net incorne should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in an above average bquidity postion and financial feverage is similar to others in the industry. 111. The firm's dayl sales outstanding ratio is comparabie to the industry average, indicoting that the fiam should neither tighten credic nor enforce ambrestringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets c. Select the correct option based on Barry's strengths and weaknesses as revealod by your analysis: 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 weil befow 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 scems to be in an average: Hiquidity position and financial leverage is similar to others in the industry. 11. 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 shouid 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. III. The firm's days sales outstanding ratio is comparable to the industry average, indicating that the firm should nesther tighten credit nor anforce 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 scems to be in a below average liquidity position and financial leverage is similar to others in the industry. N. 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 coliection policy. The total assets turnover ratio is weli 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 yalue 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. V. The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should loosen credit of apply a less stringent collection policy. The total assets turnover ratio is well below the industry average so soles 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 overage liquidity position and financial leverage is similar to others in the industry. 6. Suppose Barry had doubled its sales as welf as its inventories, accounts fectivable, and common equity during 2021 . How would that information affect the validity of your ratio analysis? (Hint: Think aboust averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.) 1. If 2.021 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 littie meaning. Potential investors who look only at 2021 ratios will be misied, and a retum to normal condesons in 2022 could hurt the firm's stock price. 11. If 2021 eepresents a period of supernormal growth for the firm, ratios based on this year will be accurate and a cocmparison between them and industry averages will have substantial meaning. Potential investors need oniy fook at 2021 ratios to be weil informed, and a return to normal conditions in 2022 could help the firm's stock price. below average liquidity position and financial leverage is similar to others in the industry. TV. The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should tighten credit of enforce a more stringent collection policy. The total assets turnover ratio is well beiow the industry average so saies 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 ieverage is similar th others in the industry. V. 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 cellection policy. The total assets tumover 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 liquidaty position and financial leverage is similar to others in the industry. d. Suppose Earry had doubled its sales as well as its inventories, accounts recelvable, and common equity during 2021 , How would that information affect the validity of your rabio analysis? (Hint: Think about averages and the effects of rapid growth on fatios if averages are not used. No calculations are needed.) 1. If 2021 represents a period of supernormal growth for the firm, ratios based on this vear will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2021 ratios will be misled, and a return to normal conditions in 2022 could hurt the firm's stock price. 11. If 2021 represents a period of supernormal growth for the firm, ratios based on this vear will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors need only look at 2021 ratios to pe weil informed, and a return to normal conditions in 2022 could help the firm's stock price. III. If 2021 represents a period of normat growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averoges will have little meaning. Potential investors who look only at 2021 fatios will be misied, and a continuation of normal conditjons in 2022 could hurt the firm's stock price. IV. If 2021 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 wili have substantial meaning. Potential investors who look only at 2021 ratios will be misled, and a return to supernormal conditions in 2022 could hurt the firm's stock price. V. 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 industry averages wil have substantial meaning. Potential investors who look only at 2021 ratios will be well informed, and a return to normal conditions in 2022 could hurt the firm's stock price