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, 2019 (In Thousands) Cash $ 274,170 Accounts payable $ 274,170 Receivables 569,430 Other current liabilities 253,080 Inventories 421,800 Notes payable to bank 126,540 Total current assets $ 1,265,400 Total current liabilities $ 653,790 Long term debt 527,250 Net fixed assets 843,600 Common equity (92,796 shares) 927,960 Total assets $ 2,109,000 Total liabilities and equity $ 2,109,000 Barry Computer Company Income Statement for Year Ended December 31, 2019 (In Thousands) Sales $ 2,850,000 Cost of goods sold Materials $1,225,500 Labor 769,500 Heat, light, and power 142,500 Indirect labor 114,000 Depreciation 114,000 2,365,500 Gross profit $ 484,500 Selling expenses 313,500 General and administrative expenses 28,500 Earnings before interest and taxes (EBIT) $ 142,500 Interest expense 47,453 Earnings before taxes (EBT) $ 95,047 Federal and state income taxes (25 ) 23,762 Net income $ 71,285 Earnings per share $ 0 7682 Price per share on December 31, 2019 $ 11 00 Calculate the indicated ratios for Barry Do not round intermediate calculations Round your answers to two decimal places Ratio Barry Industry Average Current 1 97 Quick 1 24 Days sales outstanding a days 34 days Inventory turnover 7 09 Total assets turnover 1 52 Profit margin 2 34 ROA 3 56 ROE 8 17 ROIC 7 20 TIE 2 97 Debt Total capital 42 83 M B 3 10 P E 16 46 EV EBITDA 8 19 a Calculation is based on a 365 day year Construct the DuPont equation for both Barry and the industry Do not round intermediate calculations Round your answers to two decimal places FIRM INDUSTRY Profit margin 2 34 Total assets turnover 1 52 Equity multiplier Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis 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 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 Select IIIIIIIVVItem 19 Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2019 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 ) If 2019 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 2019 ratios will be misled, and a return to supernormal conditions in 2020 could hurt the firm's stock price If 2019 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 2019 ratios will be well informed, and a return to normal conditions in 2020 could hurt the firm's stock price If 2019 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 2019 ratios will be misled, and a return to normal conditions in 2020 could hurt the firm's stock price If 2019 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 2019 ratios to be well informed, and a return to normal conditions in 2020 could help the firm's stock price If 2019 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 2019 ratios will be misled, and a continuation of normal conditions in 2020 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, 2019 (In Thousands)

Cash	$	274,170	Accounts payable	$	274,170
Receivables		569,430	Other current liabilities		253,080
Inventories		421,800	Notes payable to bank		126,540
Total current assets	$	1,265,400	Total current liabilities	$	653,790
			Long-term debt		527,250
Net fixed assets		843,600	Common equity (92,796 shares)		927,960
Total assets	$	2,109,000	Total liabilities and equity	$	2,109,000

Barry Computer Company: Income Statement for Year Ended December 31, 2019 (In Thousands)

Sales		$	2,850,000
Cost of goods sold
Materials	$1,225,500
Labor	769,500
Heat, light, and power	142,500
Indirect labor	114,000
Depreciation	114,000		2,365,500

Gross profit	$	484,500
Selling expenses		313,500
General and administrative expenses		28,500
Earnings before interest and taxes (EBIT)	$	142,500
Interest expense		47,453
Earnings before taxes (EBT)	$	95,047
Federal and state income taxes (25%)		23,762
Net income	$	71,285
Earnings per share	$	0.7682
Price per share on December 31, 2019	$	11.00

Calculate the indicated ratios for Barry. Do not round intermediate calculations. Round your answers to two decimal places.

Ratio	Barry	Industry Average
Current		1.97
Quick		1.24
Days sales outstanding^a	days	34	days
Inventory turnover		7.09
Total assets turnover		1.52
Profit margin	%	2.34	%
ROA	%	3.56	%
ROE	%	8.17	%
ROIC	%	7.20	%
TIE		2.97
Debt/Total capital	%	42.83	%
M/B		3.10
P/E		16.46
EV/EBITDA		8.19

^aCalculation is based on a 365-day year.

Construct the DuPont equation for both Barry and the industry. Do not round intermediate calculations. Round your answers to two decimal places.

FIRM INDUSTRY

Profit margin % 2.34%

Total assets turnover 1.52

Equity multiplier
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 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.
2. 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.
3. 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.
4. 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.
5. 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.
-Select-IIIIIIIVVItem 19
Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2019. 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.)
1. If 2019 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 2019 ratios will be misled, and a return to supernormal conditions in 2020 could hurt the firm's stock price.
2. If 2019 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 2019 ratios will be well informed, and a return to normal conditions in 2020 could hurt the firm's stock price.
3. If 2019 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 2019 ratios will be misled, and a return to normal conditions in 2020 could hurt the firm's stock price.
4. If 2019 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 2019 ratios to be well informed, and a return to normal conditions in 2020 could help the firm's stock price.
5. If 2019 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 2019 ratios will be misled, and a continuation of normal conditions in 2020 could hurt the firm's stock price.