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 $55,000 Accounts payable $165,000 Receivables 341,000 Other current liabilities 110,000 Inventories 330,000 Notes payable to bank 99,000 Total current assets $726,000 Total current liabilities $374,000 Long term debt $286,000 Net fixed assets 374,000 Common equity (44,000 shares) 440,000 Total assets $1,100,000 Total liabilities and equity $1,100,000 Barry Computer Company Income Statement for Year Ended December 31, 2018 (In Thousands) Sales $2,200,000 Cost of goods sold Materials $880,000 Labor 572,000 Heat, light, and power 110,000 Indirect labor 242,000 Depreciation 88,000 1,892,000 Gross profit $ 308,000 Selling expenses 176,000 General and administrative expenses $ 44,000 Earnings before interest and taxes (EBIT) $ 88,000 Interest expense 31,460 Earnings before taxes (EBT) $ 56,540 Federal and state income taxes (40 ) 22,616 Net income $ 33,924 Earnings per share $ 0 77100 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 1 95x Quick x 1 11x Days sales outstanding a days 26 44 days Inventory turnover x 7 28x Total assets turnover x 2 25x Profit margin 1 44 ROA 3 25 ROE 8 20 ROIC 7 50 TIE x 2 90x Debt Total capital 47 77 M B 3 00 P E 15 23 EV EBITDA 6 59 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 44 Total assets turnover x 2 25x 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 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 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 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 substantial meaning Potential investors who look only at 2018 ratios will be well informed, and a return to normal conditions in 2018 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 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

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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	$55,000	Accounts payable	$165,000
Receivables	341,000	Other current liabilities	110,000
Inventories	330,000	Notes payable to bank	99,000
Total current assets	$726,000	Total current liabilities	$374,000
		Long-term debt	$286,000
Net fixed assets	374,000	Common equity (44,000 shares)	440,000
Total assets	$1,100,000	Total liabilities and equity	$1,100,000

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

Sales		$2,200,000
Cost of goods sold
Materials	$880,000
Labor	572,000
Heat, light, and power	110,000
Indirect labor	242,000
Depreciation	88,000	1,892,000

Gross profit	$	308,000
Selling expenses		176,000
General and administrative expenses	$	44,000
Earnings before interest and taxes (EBIT)	$	88,000
Interest expense		31,460
Earnings before taxes (EBT)	$	56,540
Federal and state income taxes (40%)		22,616
Net income	$	33,924
Earnings per share	$	0.77100
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	1.95x
Quick	x	1.11x
Days sales outstanding^a	days	26.44 days
Inventory turnover	x	7.28x
Total assets turnover	x	2.25x
Profit margin	%	1.44%
ROA	%	3.25%
ROE	%	8.20%
ROIC	%	7.50%
TIE	x	2.90x
Debt/Total capital	%	47.77%
M/B	%	3.00%
P/E	%	15.23%
EV/EBITDA	%	6.59%

^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 % 1.44%

Total assets turnover x 2.25x

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 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.
2. 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.
3. 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.
4. 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.
5. 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.
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 substantial meaning. Potential investors who look only at 2018 ratios will be well informed, and a return to normal conditions in 2018 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 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.
3. 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.
4. 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.
5. 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.